Gold and copper might grab headlines, but silver is one of 2024’s best-performing commodities, up 21% year to date, beating its metallic cousins—and the
But many investors are seemingly shunning the gray metal.
Most silver bullion and silver-mining stock exchange-traded funds have net outflows year to date, according to Morningstar data, while U.S. Mint silver bullion coin sales are 1.34 million ounces, less than half of 2023’s sales of 3.4 million ounces through June.
It’s their loss. Silver is trading around $30 an ounce, its highest level since 2012, despite a seemingly tough fundamental backdrop for precious metals: high interest rates, tapering inflation, a strong stock market, and a still-growing U.S. economy. “This is exactly the opposite environment in which you should be investing” for silver, says Adrian Day, CEO of Adrian Day Asset Management.
Silver can be affected by the same factors that influence gold, but it also has industrial uses, since it’s a good electricity conductor. The tailwinds lifting copper, notably the global electrification push and demand for more-powerful semiconductors, has silver shining. Notably, it is also used in the powerful semiconductor chips needed for artificial intelligence.
The Silver Institute, an industry group, said industrial demand in 2023 reached a record, noting a 64% jump in demand from the solar-panel industry in 2023. The group expects 2024 usage to rise another 20%. That aligns with data from the Solar Energy Industries Association, which reported that the U.S. solar market saw its second-largest quarter of installed capacity in the first quarter, just behind the record set in 2023’s fourth quarter, led by utilities installations.
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In addition to photovoltaic demand, Robert Minter, director of ETF investment strategy at Abrdn—which issues the $1.3 billion
ETF (ticker: SIVR)—says China is driving some of the demand, both in its role as the biggest manufacturer of solar panels and as a source of investment demand. He notes that physical silver in China is trading at a premium to spot prices.
The higher demand comes as total supply from mining and scrap recycling slipped 0.5% in 2023 and is expected to fall another 1% in 2024, as demand outstrips supply, the institute says.
Silver is more than just the poor man’s gold, says David Morgan, publisher of the Morgan Report, a natural-resources newsletter, as it often acts differently from the yellow metal. Being a smaller market, silver’s price moves are much more mercurial than gold’s and subject to seasonal trends, with sluggish action in the summer and greater volatility in fall and winter.
Options to own silver are limited, too. Aside from physical bars and coins, there are only a handful of nonleveraged/inverse ETFs available. The biggest silver-backed ETF is the $13.2 billion
(SLV), while the biggest silver-miner ETF is the $1.1 billion
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(SIL), up 24% and 11%, respectively, in 2024.
Equity investors may be surprised to learn there are no pure-play silver-mining stocks, as most silver is dug up as a byproduct of base-metal or gold production.
“The dirty little secret is most silver-mining companies do not have the majority of their revenue from silver,” Day says, especially if they have gold production.
Silver’s future is likely to hinge more on industrial demand than in years past. If the robust growth in solar-panel production plateaus, it could soften silver demand and thus prices. Still, silver used in photovoltaics is locked up for years until those panels are recycled, if at all, which keeps that supply off the market and may limit how far prices sag.
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Email: editors@barrons.com
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Read More: Silver Is a Hot AI Play. It’s Beating Gold, Copper, and the Stock Market.