Silver continues to prove its use beyond just a currency or a safe haven investment, with new applications expected to see a tripling of demand in the next decade. It is also starting to beat gold at its own game.
The precious metal is slowly becoming better known for its antiviral properties and its usefulness in monitoring a person’s vital signs, as well as its importance in solar panels due to it having the highest electrical and thermal conductivity of all metals.
But predictions for silver’s rise in value also lies in the increasing demand in the next generation 5G technology.
According to Washington-headquartered non-profit industry body The Silver Institute, the electronic components that enable 5G technology will rely strongly on silver to make the global 5G platform perform seamlessly.
Right now, 5G-related silver demand only amounts to about 7.5 million oz given the industry is in its infancy.
But The Silver Institute estimates that with the ramp-up in the rollout of 5G in the coming years, the amount of silver required will climb to around 16 million oz by 2025 and 23 million oz by 2030. That’s more than 3x the current demand.
As a comparison, silver’s use in the once emerging photovoltaic industry stood at about 40 million oz in 2010, and by 2018 it had reached 80.5 million oz.
And market watchers are extremely bullish on the outlook for silver.
In its September Global Commodities Quarterly, Citi said it could see $US40 ($52.77) an oz within six to 12 months with upside cases of US$50/oz and even US$100/oz based on technical analysis.
At the moment, silver is trading at about $US25/oz — more than double its lowest point in 2020 of just under $US12/oz in March.
Silver is also starting to outperform gold. Last Tuesday the silver price climbed 2 per cent to $US24.55, while gold only advanced 1.18 per cent to $US1853.80.
This is a key trend that emerged during the only two times in history that silver has run hard – both following recessions.
The first time the price went from sub-$US5 an ounce during the 1970s recession to almost $US50 an ounce in the early 80s. The second time, following the GFC, silver again ran hard, from below $US10 an ounce to over $US45 an ounce in 2011.
These short-term percentage gains at the time far exceeded gold’s gains during the same timeframes.
Add to that the fact the gold-silver ratio continues to narrow and all signs point to a silver bull run.
The gold-silver ratio is the number of ounces of silver it takes to buy one ounce of gold.
Any widening in the ratio above the long-term average of 63 is generally taken as a cue to buy silver as it begins to look cheap in relative terms against gold. In March this year the ratio hit a fresh peak of over 120 before beginning a fairly swift descent. It’s currently sitting at around 73, not too far off its five-year low of 65.
Increasing demand and a rising silver price is beneficial for the ASX-listed stocks getting close to production or with advanced projects.
