Silver exchange traded funds have rallied along with gold bullion this year, but rising industrial demand for the white metal may help propel silver prices.
Bolstering the appeal for silver, the precious metal enjoys heavy industrial demand that benefits from an expanding global economy. Over 50% of global demand for silver comes from industries like chemicals, medicine and technological appliances.
The greater industrial demand may also help explain silver’s recent outperformance. Over the past three months, the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) increased 12.5%, whereas the SPDR Gold Shares (NYSEArca: GLD) rose 6.1%.
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Looking ahead, the quickly expanding photovoltaic panel or solar industry could continue to drive silver demand. Installations and investment in solar panels, which incorporate silver for its electrical conductivity, are at record levels, reports Henry Sanderson for the Financial Times.
According to Thompson Reuters GFMS, the solar industry’s silver demand increased 23% last year, the second consecutive year of increases.
[related_stories]Looking ahead, total global installed photovoltaic power capacity is projected to increase by about 150% to 605 gigawatts by 2020, according to Bloomberg New Energy Finance.
“Ten years ago, silver demand going into solar panels was just a blip, a rounding error,” Mitchell Krebs, chief executive of silver miner Coeur Mining, told the Financial Times. “Solar looks like it will become a larger and larger part of the overall demand picture for silver and become something significant.”
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However, increased technological efficiency has reduced the amount of silver required in newer solar panels. The amount of silver used in solar cells has been reduced by 5% to 6% every year. Nevertheless, Andreas Liebheit, head of the photovoltaic business at Heraeus, the German technology group, argued that the diminished requirements have been offset by growth in the overall market of 20% per year.
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iShares Silver Trust