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General Market Commentary
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General Precious Metals
Emerging technologies to drive silver demand
The price of silver soared in May, jumping more than 19% on safe haven demand as well as increased expectations of a swift economic recovery, given its many industrial applications. Not only was this silver’s best month since 2011, but it also marked an impressive turnaround for the white metal that just recently plunged to a more-than 10-year low. From March 18 through June 1 of this year, silver soared more than 52%, erasing all of its losses due to the coronavirus pandemic.
The question now is whether the rally can continue along with economic improvement, or whether it’s too late to start participating. I believe there’s still a lot of runway left, especially when you consider the growing need for silver in emerging technologies such as 5G wireless networks and photovoltaic (PV) cells, the building block of solar panels.
Silver ETF holdings at an all-time high
Silver started June in overbought territory based on the 14-day relative strength index (RSI), but that didn’t seem to deter investors. Global ETFs backed by physical silver have added some 142 million ounces since the metal dipped below $12 an ounce in mid-March. Holdings now stand at an incredible 746 million ounces, the most on record, according to Bloomberg data.
Interestingly, if you look at the chart below, silver ETF holdings appear to have begun tracking the price not of silver, but of gold.
This suggests to me that some investors are using the white metal as a more affordable safe haven and diversifier than gold. But there’s more to the story.
Increased silver demand in industrial applications, most notably solar
Like copper, nickel, lithium, cobalt and other metals, silver is set to become a major beneficiary of emerging industrial applications.
That includes sources of renewable energy, and solar specifically, which continues to ramp up around the globe in response to a combination of carbon emissions legislation and a rapid decrease in the cost of “green” electricity.
According to a recent report by CRU Consulting, solar power generation will increase to 1,053 terawatt hours (TWh) by 2025, close to double the amount that was generated in 2019. Amazon alone is planning five major solar projects around the world, including its first in China, as the retail giant seeks to reach 80 percent renewable energy by 2024 and 100 percent by 2030. Once completed, these five projects will generate 1.2 million megawatt hours (MWh) of energy every year, or enough to power 113,000 average U.S. homes, according to a press release.