Who caused the record price of silver to rise? Ask for solar power

Surges in the price of silver are usually driven by enthusiastic investors, but sober industrialists bear their share of the responsibility for this. This fact is worth pondering, as their spot prices are up 67% so far this year. The precious metal’s current rally to a record high of $54.24 an ounce last week appeared to be waning as speculative enthusiasm subsided, as it fell 7.1%. Tuesday. But anyone hoping for a return to levels below $30, which looked like a price ceiling until about 12 months ago, could be in for a long wait. The reason for this is that silver is an industrial metal in every sense of the word. Coin and gold investors consume barely a fifth of the annual production, while jewelry and tableware add another fifth. The rest is used in factories, where silver has multiple uses. Silver competes with gold…a new safe haven in the eyes of Egyptians. This industrial demand has been the driving force behind many of the most famous rises in silver prices. In 1979, three Texas oil traders seized control of the market and prices rose 62% between Christmas Eve and the first day of trading in 1980 before a margin settlement call triggered a broader financial panic. The incident was the inspiration for the festive commodities-themed comedy “Trading Places.” However, this was not pure speculation. Just as every conspiracy theory carries a grain of truth, every financial bubble carries a hint of real question. The advent of color photography and simple electronic flashes in the 1970s made people take pictures more than ever before; This caused a boom in sales of silver-rich photographic emulsions. Silver consumption for photography in the United States rose by about 60% between 1969 and 1979, capturing almost half of the market. The photovoltaic boom was followed by the solar energy boom. The same thing happened in 2011, when prices rose sharply to $50 an ounce as the emerging boom in solar energy drew attention to a new use for the metal. Silver is the best electrical conductor of all, and an ultra-thin paste printed on the bottom of the photocell ensures maximum electricity generation. That bubble burst as panel factories became more efficient at reducing their use. Silver consumption per watt of installed solar power this year appears to be only a tenth of what it was in 2011. Unfortunately for manufacturers, panel prices have fallen at a similar rate, once again making the precious metal an unaffordable expense. The price of silver rises to its highest level since 2011 amid scarcity of supplies. At current prices, silver has overtaken aluminum, glass in tires and polysilicon, which generates energy, to become the largest cost component in solar panels, accounting for about 17% of total spending, as indicated by “Bloomberg NEF.” To make matters worse, this year we will install about six times more solar panels than were marketed in 2019, and any reasonable efficiency savings will not be enough to offset this increase. There are also a host of other applications that are hungry for more silver as the world transitions from fossil fuels to electric power. Thousands of switches, connectors and chips in our appliances and vehicles carry very small amounts of silver. A battery-powered car consumes twice as much as a car powered by an internal combustion engine. Even AI data centers are eating their share. Draining Mines and Rising Demand Supplies will struggle to keep up with demand as the vast silver deposits in the Andes and Sierra Madre, which led the Spanish conquest of the Americas, become increasingly depleted. At the largest silver mine, the eponymous Fresnillo mine in southern Mexico, production that began after the death of conquistador Hernán Cortés in 1554 has fallen by about two-thirds since 2010. As with many other silver-only Fresnillo mines, this mine may not last more than a decade. About three-quarters of the world’s silver these days comes as a by-product of deposits that produce zinc, lead, copper or gold. These stocks also fluctuate. Lead and zinc mining peaked a decade ago, when lead-acid batteries were more common than lithium-ion batteries for electric bicycles, and galvanized steel used in China’s construction industry was booming. Does silver trading generate profits like gold? Here’s what the numbers reveal Glencore’s silver production has fallen by about half since 2016, in line with a decline in lead and zinc production. In Australia, South32’s Cannington mine, once the world’s largest lead and silver mine, could close by the early 1930s. The Port Pirie facility, one of the world’s largest lead smelters owned by Trafigura Beheer, is now up and running thanks to a bailout from Canberra earlier this year. Silver’s recent performance has been largely driven by the parallel rise in gold prices, and its long-established reputation as a cheaper precious metal than gold. But even with these speculators gone, we will remain in a market where demand exceeds supply for five years in a row. Mining companies may need prices of at least $30 an ounce to prevent a continued decline in production. At some point, the magic of industrial efficiency will allow our electrical economy to use silver more sparingly. But for now, this boom will continue, fueled by solar power.