Whenever we talk about these two precious metals, it’s always “gold and silver” or “sona-chandi” – with gold leading the way and silver following. Even in investment conversations, gold dominates. But lately, silver seems to be stepping out of the shadows and having its own ‘golden’ moment.
Let me explain why.
Since ancient times, both silver and gold have served as currency and stores of value. Like its “big brother,” silver is also a safe-haven asset, often moving inversely to equities. But what sets silver apart is its dual identity: a precious metal and an industrial workhorse.
But why did I say that Silver may be having its golden moment?
There are strong structural trends that are driving silver’s appeal. In this newsletter, we’ll delve into the key factors driving its demand, examine the dynamics shaping its supply, and assess the potential risks involved.
And do stick around till the end—I’ll also share the smartest strategies for investing in silver today.
The Demand-Supply Equation
Like any asset, silver’s price hinges on demand and supply. And in recent years, demand has been consistently outpacing supply—a shift from earlier trends.
But what’s driving this demand:
Silver has traditionally been used in jewellery and silverware, especially in markets like India, where this demand has remained steady. But the real story lies in its growing role as an industrial metal.
Between 2015 and 2024, total silver demand has risen by 14%. Within this, industrial demand has surged by a staggering 55%, driven by two key industries:
- Solar Energy: Silver is indispensable in solar panels, thanks to its unparalleled conductivity and resistance to oxidation (a problem with copper). Each solar panel uses about 20 grams of silver. With the clean energy push, demand from solar panels now accounts for roughly 20% of total silver consumption. This share will keep increasing with an increase in solar panel demand.
- Electronics and EV Infrastructure: Silver’s use in electrical gadgets and EV charging infrastructure is another significant growth area. As these sectors expand, silver’s industrial demand is set to rise further.
And hence this increase in demand looks like a structural story.
Supply Constraints:
But here’s the catch: silver supply isn’t keeping pace. For four consecutive years, the silver market has been in deficit.
An interesting thing to note is that over 70% of silver is mined as a by-product of other metals like gold, copper & zinc. India’s biggest miner of silver is in fact Hindustan Zinc.
As you can see from the above table, silver mining is down 8% from 2015 to 2024. Even though recycling has grown by 22% over the same period, its contribution to overall silver supply is not very substantial.
This persistent demand-supply imbalance is why many analysts are calling for a potential silver supercycle.
What About the Gold-Silver Ratio?
An interesting metric to watch is the gold-silver ratio — how many ounces of silver it takes to buy one ounce of gold.
This ratio shifts based on investor sentiment and market fundamentals. Right now, it’s skewed in favor of gold. But as silver’s fundamentals are strengthening, we could see this ratio move in silver’s favor, drawing more investor interest.
While all the above look very positive, there are risks of course.
Substitution in Solar Panels: Researchers are actively exploring copper as a substitute for silver in solar panels. While no breakthroughs have been made yet, this remains a potential headwind.
Price Caps from Recycling and Mining: If silver prices rise too high, it could incentivize more recycling of existing silver (jewellery, coins, bars) and make mining new silver viable, which might limit price gains.
Making place for Silver in a portfolio
While gold is often seen to be a strategic part of one’s portfolio, silver’s fundamentals are making a compelling case for it to be included too. Silver also doubles as a proxy play to the whole Solar and EV play. Both these metals have given an average return of 14–15% in INR terms from 2020 to date.
Traditionally, silver investments meant jewellery or physical bullion like coins and bars. But these come with inefficiencies like 3% GST, making charges, and storage hassles.
Silver ETFs solve this problem to a large extent. These funds are backed by physical silver held by the asset management company (AMC), and they offer easy liquidity for buying or selling. While there’s a small management fee, the convenience and cost-effectiveness are worth it, in my opinion.
You can also consider analysing silver mining companies like Hindustan Zinc in India or global players such as Glencore, Fresnillo, or BHP. However, keep in mind that for many of these companies, silver mining forms only a small part of their overall business. This makes them less effective as a direct proxy for silver investments.
That said, Hindustan Zinc is reportedly planning to demerge its silver operations into a separate entity. If that happens, it could emerge as a more focused and efficient play on silver.
Silver may still be the underdog compared to gold, but its unique mix of industrial demand and precious metal appeal makes it a compelling tactical play — especially in the age of solar energy and electric vehicles.
So, what do you think? Is silver ready to shine in your portfolio?
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Also, if you have any topics that you would like us to cover or any other feedback, do write to us at connect@incredmoney.com
Till the next time,
Vijay
