Maria Smirnova, managing partner at Sprott and chief investment officer at Sprott Capital Management, wrote in their recent silver report that she sees all the stars aligning for the gray metal.
In the report, it is noted that silver demand in 2023 has significantly outpaced supply for the third consecutive year as demand for industrial applications continues to grow. Much of the demand growth in the industrial sector is driven by photovoltaics, and overall, industrial demand for silver is expected to grow by 9 per cent this year, a record high.
Smirnova added that this momentum will support silver prices and the profitability of its miners. She also points to a fundamental shift in silver market demand that she believes will continue.
Historically, she writes in the report, half of silver demand has been industrial, with the remaining half comprising investment and investment-related areas such as jewellery, silverware, and investments in physical silver bars and coins. In recent years, however, the balance has been shifting in favour of industrial demand, which now accounts for 55% of total silver demand, already up a whopping 11% from 2022.
According to Sprott, industrial demand for silver will grow in three major areas over the next few years: the solar industry, the automotive industry (including electric vehicles and their associated infrastructure) and artificial intelligence (AI). The supply-demand imbalance in the silver market is also expected to worsen, with the supply gap expected to increase by 17 per cent and industrial demand by 9 per cent in 2024.
Since February 2021, the market has already seen silver holdings on major exchanges fall by about 480 million ounces, Smirnova said. Given silver’s precarious supply and demand situation, investors can speculate on the time it will take to deplete remaining holdings, while there is reason to believe that the global energy transition will have a hugely positive impact on silver, driving silver and related stock prices sharply higher.
