Despite a stellar performance in 2020, silver has not broken all time highs in the same way as gold, and is still considered undervalued by many analysts and investors.
With more and more countries setting carbon-neutral goals in the coming years however, the increasing adoption of green energy technologies could provide a further boost to silver prices that will see it close the gap with higher valued metals like gold and platinum.
The silver price will already be supported by all the same monetary issues supporting gold in the year ahead; high debt, increasing inflation, low GDP growth, unemployment and more. Issues that have been worrying for some time, and then compounded further by the Covid-19 pandemic ravaging the global economy.
All of these will increase demand for safe havens in the form of physical precious metals, and for those who want additional diversification and a lower cost of entry, silver will remain a popular secondary asset to own.
Silver however could enjoy additional demand to come from increasing green energy initiatives to combat climate change. Many countries now have carbon neutral targets (some legal, others as policy goals) ranging between 2030 and 2050 that will require a significant increase in renewable energy production.
President-Elect Joe Biden is also expected to bring the US in line with such goals following President Trump’s withdrawal of the US from the Paris Climate Agreement. This will see the US also targeting carbon neutrality by 2050 with massive investment in renewable energy technology. Such moves by the US and the rest of the world will see solar and wind power usage increase, and demand for silver surge as a result.
The use of photo-voltaic cells for solar panels has grown exponentially since 1992 as seen in the chart above. This is expected to continue growing, and potentially at an increasing pace given the timelines for carbon neutrality many countries are targeting, with estimates for use to double by 2023 – 2025. This will see demand for silver – a key component of the cells on account of its unbeaten electrical conductivity – increase accordingly.
While solar panels are often highlighted for silver demand, other renewable energy forms also make use of silver as the most efficient way to conduct electricity. Prime Minister Boris Johnson has promised to make the UK “the world leader in clean wind energy”, with investments in UK factories to produce offshore wind turbines, which will also contain silver.
The adoption of full electric cars will also see significantly more silver used in automobile production than before, with most components featuring silver in some form. Many countries are introducing deadlines for when traditional cars can no longer be bought, and should see hybrid/fully-electric vehicle use grow considerably.
All this additional silver demand will have to either be met from increased mining, or prices will rise on the back of a supply deficit. Increasing costs and Covid disruption have already caused issues for mines this year, and as silver is often a by-product of other mining endeavours it is unlikely to see any significant increase in supply in the short-term. Indeed, supply of silver has instead been declining for several years now, putting more upward pressure on prices should this green energy demand prove true.
The efforts to reduce the impact of climate change will undoubtedly see a green revolution around the world in the next few decades, and after years of lagging behind its more expensive brothers, silver could enjoy the benefits.