Still, silver is on track for a 22% gain through 2024 – its best performance since 2020.
The supply crisis will diminish as the shortage increases
The gap between silver supply and demand widened in 2024, highlighting a growing imbalance. Production rose just 2% to 1.03 billion ounces, while demand rose 7% to 1.21 billion ounces, leaving the market 182 million ounces short. This marks the fourth consecutive year of undersupply, largely driven by industrial demand related to green technologies.
Solar panels and electric vehicles continue to drive demand, with forecasts indicating that solar energy production could consume the majority of global silver production by 2050. China’s $411 billion infrastructure stimulus by 2025 is expected to accelerate this trend, strengthening silver’s role in renewable energy expansion.
Fed, Dollar Strength Cap Silver’s Upside
Despite bullish supply fundamentals, silver’s upside remains limited by Federal Reserve policy and a strong dollar. After cutting rates three times in late 2024, the Fed has announced just 50 basis points of easing in 2025. This gradual approach supports the dollar and keeps government bond yields high, reducing the appeal of non-yielding assets like silver.
Ten-year Treasury yields, which recently rose to 4.641%, are putting further pressure on silver, raising opportunity costs for investors.
Geopolitical tensions keep silver in play
While macroeconomic forces dominate, geopolitical risks provide a safety net for the silver price. The ongoing conflict in Ukraine and the Middle East continues to drive demand for gold, which indirectly benefits silver as a secondary safe haven. Gold purchases by central banks have also helped stabilize precious metals markets, preventing sharper declines in silver prices.