Even if safe-haven demand for hard assets abates, silver exchange traded funds could continue to find support out of the industrial sector as the precious metal is a major component in many manufactured products.
For instance, silver used in the photovoltaic panel industry is growing and could reach record levels in 2018, Maxwell Gold, Director of Investment Strategy for ETF Securities, said in a note.
“Silver’s unique reflective and conductive properties make it a key component in capturing and generating electricity through sunlight,” Gold said. “The fastest growing industrial segment for silver has been its use in photovoltaic (PV) panels for solar energy. This has resulting in demand for solar PV usage becoming a key component for the silver market.”
As the solar panel industry expands, silver will also enjoy greater industrial demand. Global solar photovoltaic annual installed capacity is expected to hit 112 gigawatts by 2021, with cumulative increase in solar electricity capacity of 506 gigawatts over the next five years, according to GTM Research.
“This should boost silver demand which uses about 2/3 ounce of metal per PV panel,” Gold said.
While some observers may be worried about policy and tax incentives under President Donald Trump’s administration’s America First Energy Plan, which lacks any mention of renewable energy, the ongoing improvements in technology and rising economies of scale could continue to support the solar industry, along with silver demand.
The solar segment is not limited to the U.S. either as the international community has increasingly turned greener. Many overseas economies are adapting solar panels and other renewable energy sources to reduce emissions in an attempt to combat global warming pressures. For instance, China, the leader in solar energy, continues to expand clean energy initiatives with photovoltaic capacity.
“A combination of higher inflation, a weakening US dollar (in first half of year) and improving manufacturing growth is likely to see silver prices trade in the $20-22/ounce range in 2017,” Gold projected.
Comex silver futures are currently trading around $18.18 per ounce, with the ETFS Physical Silver Shares (NYSEArca: SIVR) up 13.2% year-to-date.