The Demand For Silver In Solar Industry Has Been Dwindling

Silver prices have surged over the past month, reaching their highest level since late June. This price increase has led to a fall in the gold/silver ratio below 70 once again. While platinum prices have increased by 9.5%, reaching $1,790/oz, and palladium prices have climbed by more than 10%, reaching nearly $1,400/oz, the silver demand from the solar sector may be waning.

Estimates suggest that 19% less silver would be used in the production of solar modules this year compared to last year, marking the second consecutive annual decline. The solar industry's share of total silver demand is projected to drop to 14%, down from 18% last year. This outlook aligns with the Silver Institute's April prediction of significant demand decline in the photovoltaic sector this year.

Analysts attribute this trend to the reduced use of silver in silicon solar cells, which is expected to fall by an additional 17% this year. The sharp rise in silver prices, reaching a record high of $120/oz, may have prompted user industries to seek cheaper alternatives. Despite a recent fall by roughly half, silver remains 65% higher than a year ago and accounts for over 17% of a solar module's production costs, making it the largest component of material expenses.

Meanwhile, gold prices have surged, with the yellow metal trading at around $4,343/oz, up 7% from a month ago. Many analysts view this increase positively, particularly due to expectations of US interest rate hikes, though these expectations have not significantly changed in recent days. This gold price movement may not solely be due to hopes for a renewed opening of the Strait of Hormuz, as US interest rate expectations have remained relatively stable.

Additionally, investors now express growing skepticism regarding the US dollar and US Treasuries as safe havens, fueled by the Federal Reserve's cautious stance on rate hikes and its recent interventions in the Japanese yen market.