Price Volatility
Silver Institute sees next super cycle on rising demand, supply constraints
This story was originally published at 15:51 IST on 21 November 2024
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MUMBAI – A combination of rising demand and constrained supply will likely amplify silver price volatility and lead to significant upward pressure on prices during a potential upcoming super cycle, The Silver Institute said in its latest report. "If the current bull market continues to evolve into the next metals super cycle as we expect, then investment demand and industrial demand, particularly for metals critical to green energy technologies such as electric vehicles, solar panels, and energy storage systems, will continue to increase for the next several years," it said.
The global body said that this cycle is likely to be amplified by significant supply constraints. "Compared to short-term fluctuations, which are influenced more by microeconomic factors, supercycles differ in that they tend to span a much longer period of time. Price upswings during these periods may last 10 or even 20 years, generating 20 to over 40-year complete cycles."
As global financial systems face increasing challenges, silver stands out as a highly strategic asset for institutional investors due to its dual role as an industrial metal and a safe-haven during periods of market instability. Due to its low correlation with traditional assets such as equities and bonds, silver offers powerful diversification benefits, it said.
The current global environment is experiencing a tectonic shift driven by growing geopolitical tensions, heightened economic fragility, and deteriorating fiscal positions of many governments, while investors are seeking assets immune to counterparty risks and political interventions, it said. Historically, silver has proven to be a safe haven during times of financial and geopolitical crises, serving as a reliable hedge against inflation and currency devaluation.
The precious metal has served as a form of monetary reserve for over two millennia, and is once again emerging as a store of value in a world where traditional reserve currencies like the US dollar are facing challenges to their dominance.
The global transition towards renewable energy is expected to increase the industrial consumption of silver, while supply constraints from regulatory bottlenecks and limited new mining developments are expected to create a persistent supply-demand imbalance, it said.
"The political and economic fallout from events such as Russia's invasion of Ukraine has further accelerated this shift, as sanctions and asset freezes have driven both countries and institutional investors to diversify their holdings into assets like silver, which do not carry the same geopolitical risks," the organisation said. End
US$1 = INR 84.48
Reported by Ashutosh Pati
Edited by Ashish Shirke
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