The silver shortage is growing, with another annual silver market deficit. The price of silver is softly reacting to this. Something has to give, and it’s likely going to be the silver price that has to break through resistance.
RELATED – When Exactly Will Silver Hit $50 An Ounce?
Recent data published by The Silver Institute underpins our 2025 silver forecast of prices testing $49/oz.
2024 is set to become the fourth consecutive year of deficits in the silver market, that is, where demand exceeds supply and therefore drains aboveground stocks. Evidence is there for all to see that this deficit is likely to persist despite evolving market conditions such as increasing silver recycling.
Silver Institute Interim 2024 Market Report was recently released. Record silver industrial demand and 4th consecutive deficit projected. See what else Metals Focus forecasts for the silver market in 2004. See: https://t.co/7NC9FNxRZ1 pic.twitter.com/UWWasmIM0U
— The Silver Institute (@SilverInstitute) December 17, 2024
Industrial Demand is Growing
Industrial demand for silver is forecast to achieve a new record in 2024 after surpassing 700 million ounces (Moz) for the first time.
This puts 2024 industrial silver demand up 7% from the previous year.
A large contributing factor to this increase in demand is silver’s role in key sectors such as renewable energy technologies and electronics. Silver’s presence in photovoltaic cells and its growing input into in electric vehicles highlight its importance in the carbon reduction transition which, given strong commitments by Western governments, will continue to underpin demand for silver.
The Supply-Demand Imbalance
Global silver demand is forecast to rise by 1% year-over-year to 1.21 billion ounces in 2024. While this increase is modest compared to previous years it shows how demand remains strong despite gains in the silver spot price. Silver saw a 34% rise in 2023 and is set to close 2024 24% higher.
The deficit in the market is due to the demand increase that has occurred since 2020. Total silver demand was 926.8 million ounces in 2020 and by 2021 it jumped to 1.1 billion ounces. 2022 surpassed this with a demand of 1.28 billion ounces. Despite a slight dip to 1.19 billion ounces in 2023, demand in 2024 is expected to rebound to 1.21 billion ounces.
On the supply side, silver production has remained relatively stable over the past decade, fluctuating within a narrow range of 950–1,050 million ounces annually.
- Recycling rates have increased as higher silver prices encourages selling silver back into the market yet even at this higher rate recycling has failed to reduce the deficit.
With demand growth outpacing the constrained silver supply the market has recorded a deficit for the past four years.
Latest Silver Institute estimate: a deficit of 282 million ounces for 2024, the sixth consecutive year of deficits, and the largest since the blowout figure in 2020.
Note how the shortage is increasingly driven by industrial uses (especially in the past four years) – sectors… pic.twitter.com/RujVhsmnH8
— HK Nik (@hk_nik) November 14, 2024
Another Annual Silver Market Deficit
The silver market balance over the last decade reveals a clear trend of increasing deficits which has become more prominent since 2021:
- 2015: -18.4 Moz
- 2016: +54.7 Moz
- 2017: +40.5 Moz
- 2018: +1.3 Moz
- 2019: -4.1 Moz
- 2020: +30.6 Moz
- 2021: -95.4 Moz
- 2022: -263.5 Moz (the largest recorded deficit)
- 2023: -184.3 Moz
- 2024: -215.3 Moz
These figures illustrate a growing structural deficit in the silver market which provides fundamental justification for our technical target in 2025 of $49/oz.
Physical Silver Market Trends
Physical investment in silver bars and coins is forecast to fall by 15% in 2024, reaching a four-year low of 208 Moz. This drop reflects subdued retail investment activity, particularly in the United States where coin and bar sales are expected to fall by 40% to their lowest level since 2019.
It is thought that the lack of new macroeconomic crisis this year reduced demand for safe-haven silver. On the contrary, Indian silver investment demand has received a boost from the reduction in import duties on silver bullion.
Price Implications of Another Silver Market Deficit
Four straight years of market deficit will be draining above-ground inventories which continue to pressure prices higher and is a big reason to why many analysts are expecting silver to build on its recent price gains.
Despite a modest rise in recycling rates, the current supply-demand dynamics suggest that the only realistic way to fill the void in the short-term is for prices to rally high enough to encourage selling in much larger volumes.
Absent a major economic recession or a sharp collapse in industrial demand, silver prices are poised to rise further in 2025 as the market seeks equilibrium.
Written by Levi Donohoe.
