We cover what drives the demand for silver and whether you should invest in silver.

The News

So far in October, the price of silver in India has increased by nearly 10% to ₹99,600 (per kilogram).

As per Silver Institute (a global industry association), the silver deficit (the difference between the demand for silver and its supply) is expected to be 67 lakh kilograms, a 17% increase from 2023. It is the fourth consecutive year that the world is facing a silver deficit. As a result, since the start of this year, the price of silver has shot up by 31%.

The reason for this deficit, you ask?
Well, silver is not only a precious metal but also an essential one. Unlike gold, it has multiple use cases. Let’s decode.

The industrial use of silver:

From household to healthcare, from a device you’re using right now to the water purifier in your home, silver is used almost everywhere. The electronics industry alone consumes over 50% of the world’s silver, including in the manufacturing of semiconductors.

The average solar panel contains 20 grams of silver and a typical Electric Vehicle battery of 100 kWh capacity requires 1 kilogram of silver per vehicle. So as the world goes green, this trend would further shoot up the demand for silver.

You see, the demand drivers of gold and silver are very different, leading to returns over the years. While demand for gold is driven majorly by self-consumption and investment, silver’s demand is driven by industrial use.

Gold v/s Silver

In India, since the start of 2024, gold has delivered about 24% returns, and silver has delivered 31% returns.

In the past five years, gold’s annual returns have been around 15.2% while for silver it’s 15.9%.

It’s important to note that from August 2020 to 2022, silver dropped by almost 32%. During the same period, gold fell by about 10%.

Gold has shown less volatility over time, while silver’s performance has been more unpredictable because it relies heavily on industrial demand.

To conclude

Silver’s cyclical nature means it can deliver standout performance during periods of economic expansion. However, this also means that silver comes with more volatility, as its fortunes are closely tied to industrial trends, making it less suitable for portfolio diversification relative to gold.