Silver prices have surged by more than 10% this week, reaching USD 63.9 per troy ounce, the highest level since late June, according to Commerzbank’s Carsten Fritsch [1]. This rally has also caused the gold/silver ratio to fall below 70 [1]. The price increase follows sharp gains in other precious metals such as platinum and palladium, which rose in the wake of gold [1].
Despite the price surge, headwinds are emerging for silver demand from the solar sector. BloombergNEF (BNEF) estimates that 19% less silver will be used in the production of solar modules this year compared to last year, marking the second consecutive annual decline [1]. As a result, the solar industry’s share of total silver demand is expected to decrease to 14%, down from 18% in the previous year [1]. This assessment is consistent with the Silver Institute’s April outlook, which also anticipates a significant drop in photovoltaic sector demand [1].
BNEF attributes the reduction in silver usage to a further 17% decline in the use of silver in silicon solar cells this year, a trend likely triggered by the sharp rise in silver prices, which peaked at a record USD 120 per troy ounce at the end of January [1]. Although the price has since fallen by roughly half, it remains about 65% higher than a year ago [1]. Silver currently accounts for more than 17% of the production costs of a solar module, making it the largest component of material costs, according to BNEF [1].
CONCLUSION
Silver prices have experienced a significant rally, but the outlook for demand from the solar sector is weakening, with both BNEF and the Silver Institute forecasting further declines. While elevated prices have supported the market, the reduction in industrial demand could pose challenges for sustained price growth.