Author: Yanwaizhiyi , Wall Street Insights
In the past, silver was called "the poor man's gold" not because it was actually cheap, but because the market never took its scarcity seriously.
With ample supply, adjustable inventory, and diversified uses, the market has long believed that silver can always be quickly replenished regardless of fluctuations in demand. Because of this, it can be traded repeatedly as a shadow of gold, yet it has almost never been seriously allocated to any investment.
However, this premise has been shattered by reality.
Since 2021, the global silver market has experienced a physical supply-demand gap for several consecutive years. Unlike previous short-term tensions amplified by the financial cycle, this gap comes directly from the industrial side: demand for silver in key sectors such as photovoltaics, electrification, and high-end electronics is expanding rapidly, while supply can hardly keep up.
Even more critically, the silver supply system is highly insensitive to price signals.
More than 70% of global silver production comes from the byproducts of other metals, and the pace of production is determined by the investment cycles of copper, lead, and zinc, rather than the price of silver itself. This means that even if prices rise, supply is unlikely to increase rapidly; as inventory buffers are continuously depleted, the market faces not just short-term fluctuations, but sustained constraints.
It was at this moment that silver began to truly shed the narrative of "the poor man's gold." It was no longer just a cheap substitute when gold prices rose, but was becoming a material that was continuously consumed by key industries and was difficult to replace.
(Silver prices are approaching $100 per ounce, compared to just $50 per ounce in mid-October last year, nearly doubling in three months.)
1. Silver's "identity dilemma": caught between gold and industrial metals
To understand why silver has been undervalued for so long, we must first understand its "identity dilemma".
In the modern commodity system, assets can be broadly divided into two categories:
One type is credit-based assets, with gold being a prime example. Gold's value anchor does not come from industrial use, but rather from the credit system and reserve demand. Even in years with the weakest demand, global central banks' net gold purchases can still account for 15%–25% of total annual demand, providing a stable base for its price.
Another category is growth assets, such as copper, crude oil, and iron ore. These metals have almost no financial attributes, and their prices are mainly driven by economic cycles, infrastructure, and manufacturing investment.
Silver, however, falls precisely in between these two categories.
According to the World Silver Survey 2025, global silver demand in 2024 will be 1.164 billion ounces (approximately 36,200 tons), of which:
Industrial demand was 681 million ounces, accounting for approximately 58%.
Demand for jewelry and silverware was 263 million ounces, accounting for approximately 23% of total demand.
Investment demand (silver bars, silver coins, ETFs) is approximately 191 million ounces, accounting for about 16%.
The problem is that the behavioral patterns for these three types of needs are completely different:
Industrial demand depends on industry cycles, jewelry demand is highly price-sensitive, and investment demand is highly susceptible to fluctuations in macroeconomic sentiment.
This structural division has resulted in silver lacking a stable, singular, and dominant pricing anchor for a long time.
The result is reflected in prices, meaning that silver has been forced to be priced in line with gold for a long time.
One intuitive indicator is the gold-silver ratio. Over the past half-century, the historical average of the gold-silver ratio has been around 55–60; however, between 2018 and 2020, this ratio once exceeded 90, and even approached 120 during the height of the pandemic.
Even with record-high industrial demand for silver in 2024, the gold-silver ratio has remained in the 80-90 range for a long time, significantly higher than the long-term average.
This doesn't mean silver is "useless," but rather that the market is still using the financial logic of gold to price silver.
2. The repositioning of silver: from "diversified uses" to "locked in by industry"
The real change didn't begin in the financial markets, but rather quietly occurred in the industrial sector.
To summarize the current changes in one sentence: Silver is shifting from an industrial metal with diverse uses to a functional material locked in by key industries.
1. Photovoltaics: Silver Becomes "Indispensable" for the First Time
Photovoltaics is the most crucial link in the changing demand structure of silver.
In 2015, the global installed capacity of photovoltaic power was about 50GW; by 2024, this figure had exceeded 400GW, an increase of more than eight times in less than ten years.
The industry is indeed undergoing a continuous "de-silvering" process. The amount of silver used per watt has decreased from about 0.3 grams in the early days to about 0.1 grams under current mainstream technology.
However, the expansion rate of installed capacity is far faster than the decrease in unit usage.
According to the World Silver Survey 2025, the photovoltaic industry's actual demand for silver reached 198 million ounces in 2024, more than 1.6 times that of 2019, accounting for about 17% of the total global silver demand.
More importantly, silver's role in photovoltaics is not "easily replaceable." In core indicators such as conductivity, long-term stability, and reliability, silver remains the optimal choice for overall performance. Technological advancements have changed its application, not its status.
This gave silver, for the first time, a large, rapidly growing, and price-insensitive source of demand.
2. Electric vehicles and AI infrastructure: The usage is not exaggerated, but the replacement is extremely difficult.
If photovoltaics brings certainty to the scale of demand, then electric vehicles and digital infrastructure bring about a change in the nature of demand.
A traditional gasoline-powered car uses an average of about 15–20 grams of silver; while a new energy vehicle typically uses 30–40 grams of silver.
Against the backdrop of limited growth in global auto sales, the penetration rate of new energy vehicles has increased from less than 3% in 2019 to nearly 20% in 2024, structurally boosting the demand for silver.
At the same time, the demand for silver in data centers, AI servers, and high-end electronic devices is more reflected in its irreplaceability than in its absolute usage.
In 2024, silver demand in the electrical and electronics sector reached 461 million ounces, setting a new record high for several consecutive years.
These application scenarios are relatively insensitive to price, but extremely sensitive to supply stability.
3. The reality on the supply side: Silver is not a metal where "price increases can lead to increased production".
In stark contrast to the certainty on the demand side is the rigidity on the supply side.
In 2024, global silver mine production was approximately 820 million ounces, representing a year-on-year growth rate of less than 1%.
More importantly, over 70% of global silver production comes from byproducts, primarily from lead, zinc, copper, and gold mines . This structure has remained virtually unchanged over the past two decades.
Primary silver mine production is only about 228 million ounces, accounting for less than 30%, and is still in a long-term downward trend.
This means that silver production is not determined by silver prices, but rather by the investment cycle of base metals.
4. From cyclical shortages to structural tightness
Looking back at history, silver has experienced bull markets before, but most of those past trends were derivatives of financial cycles.
The difference is that since 2021, the silver market has experienced a physical supply-demand gap for several consecutive years.
According to the World Silver Survey 2025, the global silver supply and demand gap will average 150-200 million ounces per year from 2021 to 2024, with a cumulative gap of nearly 800 million ounces.
Furthermore, visible silver inventories are not abundant. Current global circulating inventories can only cover about 1–1.5 months of consumption, significantly lower than the 3-month safety line typically considered for commodities.
Once large amounts of silver enter photovoltaic modules, electrical equipment, and infrastructure, it is very difficult for them to return to the circulation market.
5. Silver is no longer just a shadow of gold.
Silver didn't suddenly become scarce; it simply met all three conditions simultaneously for the first time:
The demand is real and continuous.Key applications are difficult to replace
Supply growth is highly constrained
In the past, these three points have never occurred simultaneously.
While the market still views silver as "the poor man's gold," the industry chain has begun to re-examine it using the standards of key functional materials .
Silver may still fluctuate, but one thing is certain: it is no longer just a shadow of gold.
This is the most important, and most easily underestimated, underlying change in this round of market activity.
