
Despite being in record demand leading to supply deficits in the last two years, the price of silver remains considerably down on the levels seen in 2020 and for large periods of 2022 was set to record an annual drop. So, why is silver not performing better?
In this article, we’ll explore what drives the silver price and where the precious metal could be heading in the coming years.
Silver’s Fundamental Case
As with any mined commodity, a key driver of price is the balance between the supply and demand of silver. In this regard, silver’s fundamental case is strong. The metal is a key component of two of the major sectors of our times, the energy transition and the tech revolution, which is driving industrial demand to record levels and leading to shortfalls of supply as mined output and recycling struggles to keep up.
In support of this, the Silver Institute is forecasting total silver demand to be in excess of 1.2 billion ounces, the highest on record, leading to a supply deficit of 194 million ounces – four times the deficit of 2021.

Silver’s Green Credentials
A key source of silver’s industrial demand comes from the solar industry where the metal is used as a conductor to carry the electricity generated from photovoltaic cells as well as into the grid system. With governments and companies having set bold climate targets, the need to shift away from fossil fuel-generated power and towards renewable sources such as solar becomes ever more urgent. As such, there is likely to be a significant demand for silver for the foreseeable future and one that will be much less affected by any economic downturn than other more consumer-driven sectors.
Indeed, the potential demand for silver from the solar industry is so great that a recent paper from the University of New South Wales stated that the current usage trajectory would exhaust all of the silver reserves by 2050.
Silver’s conductivity also sees it used in the manufacturing of electric vehicles, another sector that is set to see a huge demand growth over the coming years as combustion engines are phased out.
This same conductive quality makes silver in demand across electronics, including in 5G technology. With so much of our lives now dependent on mobile technology, increasing connectivity and access to 5G is a key consideration for governments and is set to be another significant demand source for silver. In addition, silver is often cited for its critical role in electrification as the main driver behind bullish forecasts for the metal.
So why is silver not trading higher?
The price of silver remains below its high of 2022, when it climbed above $26 an ounce in March, even though the fundamental case has strengthened since then. So why is this in-demand metal not trading higher?
Silver is exposed to more factors than simply its supply and demand fundamentals. Generally viewed as a haven asset by analysts and investors, the relative optimism or pessimism on the outlook for the global economy can be another driver. Yet even though 2022 proved a year in which fear and concern were dominant sentiments, silver endured a multi-month slump from April through to September.
This collapse in silver’s price was sparked by the change in the stance of the Federal Reserve, with the US central bank adopting a hawkish monetary policy that saw it implement a series of interest rate hikes. As a non-yielding asset, silver found itself out of favour in place of other interest-bearing assets such as bonds. By the final quarter of the year, silver’s fundamental case finally got the chance to be heard again with the price staging an impressive rally and recording a modest annual increase over the course of 2022.
So far in 2023, silver’s rally has been on pause with the price oscillating on either side of $24 an ounce. Yet given gold, with which silver enjoys a closely correlated relationship, has enjoyed a buoyant start to the new year to reach its highest level in eight months, silver’s lack of action presents a potential buying opportunity.
With online investment platforms like Kinesis offering their digitalised silver-backed currency, Kinesis Silver KAG, it’s never been easier for every investor to access silver ownership as well as a return on their metals, thanks to their fee-based yield system.

Why silver is undervalued?
This mismatch between the action on gold and the lack of movement on silver, despite the underlying factors, a weaker US dollar and the prospect of the Federal Reserve ending its interest rate hikes in the near future, points to an underlying conservancy on how much silver can climb that doesn’t inhibit gold.
Throw silver’s overwhelmingly strong fundamental case in with an end to the single biggest cause of silver’s mid-year slump in 2022 and it all points to a metal trading well below its true value. To illustrate the impact of the hunger for silver in recent months, holdings of the metal in London vaults sank in November to their lowest level since the London Bullion Market Association began publishing the data in 2016, with the metal being pulled out of storage to meet physical demand from industry, jewellery as well as for coin and bar investors.
Put all together and it is hard to see silver remaining at these comparatively low levels for much longer.
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Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basi