Industrial Activity & Investment Demand Will Drive Silver
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Silver continues to show its luster alongside gold this year, but both carry differing demand drivers. Silver will benefit from recovering industrial activity and increasing investment demand—both highlighted in Sprott’s latest silver report.
As seen though the S&P indexes, silver continues to show upside. The S&P GSCI Silver index is just ahead of the S&P GSCI Precious Metals index and almost five times higher than the S&P Industrial Metals index near the end of July.
The duality of silver as an industrial metal and precious metal will keep it circling within investor atmospheres. Investors seeking portfolio diversification in particular appreciate its potential for portfolio diversification and the growth component of the metal, given its usage in industrial applications.
Silver’s Structural Deficit Amid Industrial Demand
One of the key drivers for continued upside in silver’s prices will be industrial demand. As noted in the report by Maria Smirnova, Sprott Inc managing partner and Sprott Asset Management senior portfolio manager & CIO, silver’s usage is dynamic. The majority of its usage (59%) links to industrial applications, mostly electricity-related. This is due to silver’s strong electrical conductivity properties, making it an imperative commodity when it comes to global electrification.
When tight supply meets increased demand, this can be a strong catalyst for higher prices. Silver continues to be in a structural deficit—it’s not a new market phenomenon and the deficit has been present since 2021. As the world becomes more heavily reliant on electricity to power applications, demand will continue to be met by tight supply.
“With supply deficits deepening and demand intensifying across both industrial and investment channels, silver’s bull market appears well supported,” Smirnova confirmed.
The Affordable Precious Metal
With gold being over $3,000 per ounce and silver at about $38 per ounce or about 1% of gold’s price, the investment case is simple. The precious metal offers investors easy ingress into getting precious metals exposure without breaking the bank.
Tariffs and geopolitical tensions continue to add market uncertainty, substantiating the need for safe haven assets like silver. Furthermore, in the case of getting exposure via exchange-traded products (ETPs), attaining that exposure is made even simpler.
“At the same time, silver is regaining prominence as a trusted safe-haven asset in today’s environment of increased geopolitical tensions, inflationary pressures and financial market instability,” Smirnova noted. “Historically, silver has served as a store of value in periods of crisis, much like gold, but with the added benefit of being significantly more affordable and accessible for retail investors.”
2 Options for Silver Exposure
For a pure play option to get silver exposure consider the Sprott Physical Silver Trust (PSLV). The fund invests in unencumbered and fully allocated London good delivery silver bars. Additionally, shareholders can redeem their shares for physical bullion anywhere in the world (subject to certain minimum conditions) if they want a more tangible investment experience.
An alternate method for getting silver upside is through miners. Investors may opt for the pure play of silver via PSLV, but they may also want to capture the upside of miners. This is where the Sprott Silver Miners & Physical Silver ETF (SLVR) is an ideal option.
SLVR tracks the performance of the Nasdaq Sprott Silver Miner Index, providing exposure to companies that support the industry: producers, developers, and explorers. SLVR also includes exposure to physical silver, offering a broad, diversified option.
“We believe silver offers an attractive opportunity for investors seeking exposure to a hard asset with both growth and defensive qualities,” Smirnova added.