Silver has had an interesting last two years, with $PSLV being at a low of 4.77 USD (20th march) during the 2020 stock market crash and reaching a high of just over 10 USD in under 5 months on the 7th of August. Silver now sits at 8.73 USD (at the time of writing) after dropping over 3% today.
Across the last few months, silver has lost much of its momentum from retail traders circulating internet forums and micro-blogging sites. However, this doesn’t mean potential investors should ignore the still-significant potential of silver and $PSLV (a closed-end trust investing in silver bars). Many continue to believe that the precious metal is still undervalued.
In the early 18th century, Isaac Newton monetized silver – setting the ratio between gold and silver at 15.5, which held until 1873. This keeps in line (relatively to now) to the abundance of silver in the earth’s crust which exceeds gold’s by about 18.75 times. However, the ratio of gold’s price to that of silver’s is around 70 at the time of writing – which seems to be completely ridiculous when you take into account the fact that whilst silver and gold were in circulation as monetary metals their ratio was generally held at around 14 to 16.
We can clearly see gold’s price rising around the ever-increasing uncertainty of the purchasing power of the dollar and other fiat currencies. So it seems reasonable to conclude that silver will also rise to its traditional monetary relationship in regard to gold. On the other hand, silver is primarily an industrial metal – meaning some of its industrial demand may have to be absorbed by sales of bars, coins and other monetary forms.
Having said that, silver’s industrial prospects seem bullish too, especially in 5G and Solar technologies. In ‘The Assay’, Executive Director of the Silver Institute – Michael DiRienzo tells us that the uses of silver in the industrial complex are becoming increasingly widespread.
Silver is key for producing metallisation paste in solar cells. By the end of 2019, global cumulative installed capacity had exceeded 600GW, including record-high additions of 116GW in 2018. It has resulted in silver offtake in PV applications reaching 3,000t per annum. With escalating electricity demand and global commitments to deliver renewable energy targets, silver demand is looking promising, with healthy capacity growth forecast over the next few years.
Looking at some of the key PV markets in China, newly added capacity of 30-40GW can be expected over the medium term. In Europe, the outlook is bright with total installed capacity expected to reach 255GW by 2023. In the US, steady growth can be expected on the back of healthy demand in both the utility and residential sectors. In India, installations are expected to start rising against a near-term target of 100GW by 2022. Other regions, such as the Middle East, Latin America, South-East Asia and Africa, are also set to see installations rise, which will continue to drive overall renewables growth over the next few years.
DiRienzo, M. (2020, November 10). The Case For Silver Investment. The Assay. https://www.theassay.com/articles/the-case-for-silver-investment/
He tells us that with utility-scale PV’s increasing development and deployment, silver is forecasted to extend its role to its surrounding facilities.
Speaking on 5G, he produces another bullish argument for the industrial demand for silver.
5G is not just an incremental improvement over 4G — it is the next major evolution of mobile communication technology. It will massively improve download speeds and reduce latency, but more importantly, it will facilitate significant technological progress in a whole range of sectors, such as the Internet of Things (IOT) and autonomous driving. The electronic components that enable 5G technology will rely heavily on silver to ensure that the global 5G platform performs seamlessly. In a future 5G-connected world, silver will be a necessary component in almost all aspects of this technology, resulting in yet another end-use for silver in an already vast and versatile demand portfolio.
At present, 5G deployment is still in its early stages and, as such, 5G-related silver demand currently constitutes approximately 7.5 million ounces (Moz). With the rollout of 5G in the coming years, however, silver’s role in the electronic applications used in 5G is forecast to rise significantly to approximately 16 Moz by 2025 and as much as 23 Moz by 2030, which would represent a 206 percent increase over today. For comparison purposes: in 2010, silver’s use in the once-emerging photovoltaic industry was approximately 40 Moz, and by 2018 it stood at 80.5 Moz.
DiRienzo, M. (2020, November 10). The Case For Silver Investment. The Assay. https://www.theassay.com/articles/the-case-for-silver-investment/
However, Silver also functions as a hedge against ever-increasing worries about inflation due to irresponsible and short-termist Western financial policy.
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