Silver one of those precious metals that are popular with people who like to invest in hard assets.
The demand for silver is generally more than for gold because of its use in many industrial applications. However, silver is essentially still a monetary metal which is why many people who invest in gold also buy silver. Its price usually tracks with the price of gold over time. The supply and demand factor plays a very significant role in the price of silver.
Uses of silver
Silver is a key component of photovoltaic cells used in the manufacture of solar power cells. In recent months there has been a surge reported in the use of solar energy as more people are turning towards alternative energy sources whether to save the environment or to save money they would have to spend on fossil-based energy sources. However, the energy sector isn’t the only one that needs more silver. According to the Silver institute, the automotive manufacturing sector is expected to need some 90 million ounces of silver in the next 5 years. This is projected to be more than what the photovoltaic industry will need.
There are two characteristics that make the use of silver in the automotive industry important: thermal and electrical conductivity.
Between 0.5 and 0.9 ounces of silver are used in making one internal combustion engine that has the required loading required for electric and hybrid cars. This might seem like a modest amount but it adds up to a large amount considering that millions of cars are manufactured yearly. In fact, it is expected that in 2021 alone, 85 million cars will be manufactured globally.
The age of electrical cars
With more people being environmentally conscious and taking steps to reduce their carbon-foot prints, the age of gas fueled cars is over. Analysts predict that electrical vehicles will account for 9% of all global light car manufacturing.
Silver is also used in a lot of electrical control units with a wide range of functions not only in the engine but the main cabin as well. For instance, it is used in navigation systems, infotainment systems, power steering, airbag deployment systems, automatic braking, security and other vital functions.
The average silver loadings per vehicle have been rising. This is true not only for electrical vehicles but for other kinds of vehicles too. Driverless or autonomous cars that have a lot of electrical systems will also increase the demand for silver. This year alone, the demand for silver in the automotive industry is expected to be more than 60 million ounces. That is just demand from one industry when considering how much silver is used in other industries then that demand rises quite significantly.
The Silver Institute has compiled a report that looks in depth at the use of silver in the automobile industry. It goes into details on how hybrid and electrical cars have evolved. It also looks at the policies that various countries have come up with in regards to transportation and how they impact transportation.
The bottom line is that the use of silver is more widespread than any other precious metal and demand is more likely to expand because of the superior electrical conductivity of the metal. Silver is also resistant to oxidation and it has proven to be extremely resistant in harsh conditions.
After all has been said an done, the Reserve Banks’ policies are the biggest drivers of the silver price. Measures that have been put in place in response to the global economy meltdown have been in favor of safe-haven investment classes like gold and silver. There has never been a better time in recent history to buy silver than right now. The returns promise to be significant in the long term.