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In the year 2023, amid a challenging global economy, the industrial demand for silver is poised for a Historical highlight to be achieved. This strong industrial demand will keep overall silver demand at historically high levels, even as other sectors experience declines. This is accompanied by a slight decrease in the total silver supply, which is likely to cause the silver market to continue to experience a significant deficit.
The standout thing in 2023 is the significant 8% increase in industrial demand for silver, which exceeds global GDP growth. This increase is mainly driven by the growing photovoltaic (PV) market, particularly in China, where the installation of PV systems is expected to approach 400GW. Further, demand in the electronics and electricity sector is expected to increase by 11%, helped by investments in 5G networks and the increasing electrification of vehicles. Significant growth is also expected in the use of silver in ethylene oxide catalysts.
In contrast to growth in the industry, a 10% decline in total silver demand is expected, coming in at 1.14 billion ounces. Physical investment in silver is expected to decline by 21%, marking a three-year low. Large declines are to be expected in India and Germany in particular, caused by high silver prices and fiscal changes. In the US, the decline is less pronounced, partly due to the banking crisis earlier this year, which led to an increased interest in silver as a form of wealth preservation.
Demand for jewellery and silverware is also expected to decline significantly. In India, where demand is normalizing after a strong post-COVID recovery in 2022, this decline will be the steepest. Outside India, the situation is different: the demand for jewellery will rise slightly and the decline in silverware will be more limited.
On the supply side, a decline is expected to the lowest level in three years, with a 2% decline in mine production. Mexico, Peru and Argentina are the largest contributors to this decline. At the same time, a marginal increase in silver recycling is expected, mainly driven by industrial residues.
The global silver market is expected to continue to show a significant deficit of 140 million ounces. While this is 43% lower than the 2022 all-time high, it is still high in historical terms. These shortages are expected to continue for the foreseeable future.
Institutional investors have shown little interest in silver so far in 2023, influenced by general economic developments such as Federal Reserve policy and market returns. Economic challenges are expected to continue into 2024, which may reduce silver's attractiveness as an investment. However, geopolitical developments and turmoil within the financial system could have a positive impact on the demand for silver, which could have a positive effect on the Silver price.
