As more spending on solar panels comes through, silver should rally. Bottoming out of the global economy in

2024 should also help industrial demand.

**Bank of America's 2024 Silver Analysis

The World’s Appetite for Silver Is Squeezing Supply

While silver has found a floor above $20/oz, prices have not been able to push higher, despite production discipline from the miners and rising demand from green technologies. This has been heavily influenced by weak industrial production and a lack of investor interest globally. However, if the continued focus on the energy transition is accompanied by stronger global growth, silver prices should push higher.

 

2-Inventories at CME and LBMA warehouses have fallen

Silver prices have been supported by fundamentals. Granted, silver is often traded over-the-counter (OTC), reducing visibility somewhat. But it is worth noting that above-ground-stocks, especially at storage sites linked to the Chicago Mercantile Exchange (CME) and London Bullion Market Association (LBMA), have fallen steadily (Exhibit 230)

GoldFix Comment: Silver is "often traded over-the-counter" is all you need to know in the context of supply shrinking. Silver deals are done in increasing numbers off exchange. That implies the Comex is decreasing as both supply and demand is being satisfied elsewhere. Silver is being bought at the source. The Comex, when used, is a toll booth and a weigh station only now.

3-Mine supply remains well below all-time highs

Supportive fundamentals have been driven by both supply and demand dynamics. We usually focus on the following line items:

• Mine supply: in contrast to gold, a much larger share of silver production is consumed, rather than put into storage. This means that, similar to the base metals, prices of the white metal tend to be driven by market balances.

• Traditional industrial demand: industrial users have been the mainstay of the silver consumption and buying is often linked to the strength of economic growth. Indeed, silver tends to outperform gold when industrial activity accelerates

• Green silver demand is becoming more important as the white metal is used heavily in high-end electronics applications.

Looking into mine supply first, sustained silver price declines 10 years ago ultimately prompted production cuts. These curtailments have helped to rebalance the market, laying the foundations for the price increases thereafter.

Exhibit 231 takes this a step further, comparing silver production from the miners covered by our colleagues in equity research with total output. The data suggests that supply is set to remain subdued. This is also linked to CAPEX discipline in recent years. In the end, the message is always the same: no investment, no production.

GoldFix Comment: Supply dropped from low prices implies it can come back online as prices make it economical to mine. We think and have said so before, the easy, cheap Silver is non existent. This is further corroborated by the decrease in Silver hedging out of Mexico despite the increase in demand Goldman alerted us to a few months ago. Finally, Bai Xiaojun and others have informed us China is now importing lower grade silver ore and concentrate to make up for delivery shortfalls

5- Offtake from green sectors set to increase

GoldFix Comment: it is worth noting that nowhere else do we see this type of comment on Silver as being a key to EV production. BOA has been very frank about Silver when they talk about it at all. Other banks completely ignore the metal in favor of copper. BOA also has large active mining clients. They also held substantial short position (we speculate) possibly hedging someone’s physical purchases last year.

Meanwhile, Exhibit 234 highlights that solar installations around the world are also increasing. While this is supportive of silver offtake, there are caveats because panel manufacturers have been

1. reducing the silver content in panels (This will reverse in the next generation of Photovoltaics), at the same time as…

2. solar panels have become more efficient, so fewer installations are necessary. Exhibit 235 picks up on this, suggesting silver demand will stabilise at elevated levels.

As such, aggregate silver purchases from the green economy will likely trend higher in the coming years, accounting for 22% of total silver demand by 2030E, from 18% in 2022.

GoldFix Comment: Solar silver demand’s moving parts are hard to be precise on. Silver use is getting more efficient due to technological innovations at a time when new photovoltaic technology also demands more silver to drive truly efficient panels. More on that in the footnoted story here1. The bottom line in this category is: demand will increase, then level off at a higher level

 

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