Lear Capital on The Current State of the Silver and Platinum Market: Find Out What Key Factors Are Shaping Silver and Platinum Demand

Gold isn’t the only precious metal that can be used to diversify your portfolio: Silver and platinum can also play a part in investor’s plans, according to Kevin DeMeritt, founder of Los Angeles-based gold and precious metals firm Lear Capital.

In recent years, the demand for silver has increased. With the exception of 2020, when the COVID-19 pandemic caused widespread disruptions in numerous sectors, silver’s value rose from 2017 through 2022. It has generally remained above $20 per ounce since reaching that level in 2020.

Net silver investment also increased in 2020 for the fifth straight year, according to.an announcement from the nonprofit Silver Institute.

 Silver’s physical qualities allow it to be used in numerous ways. It tends to resist corrosion and oxidation; it’s fairly malleable, allowing it to be shaped into various formats; and it’s a strong thermal and electrical conductor.

 “The industrial uses are just going through the roof,” Kevin DeMeritt says. “You have this industrial demand really pushing up silver prices. At times, it’s very difficult for us, as dealers, to actually go out and get silver bars and coins in big quantities.”

The crucial role silver plays in solar panels that help turn sunlight into energy has contributed to the demand for the metal. Approximately 100 million ounces of silver are utilized annually, according to Lear Capital, in a silver paste used within solar cells to direct electrons either into storage or consumption.

Photovoltaic power production is currently the top source of green electricity, and its use is expected to grow. The technology is forecast to have the largest installed power capacity on a global scale by 2027, according to an International Energy Agency estimate, which said photovoltaic power should eventually surpass both coal and natural gas use.

As the need for silver has grown, silver production has increased — in 2021, it expanded by more than 5%, marking the biggest rise in silver excavation activity in several years, according to the the Silver Institute.

The increase in mining activity, though, hasn’t directly led to a greater amount of available silver, even with a nearly 7% increase in global silver recycling that put some silver back into circulation.

As more silver usage needs develop, particularly within the energy sector, the available supply could become more strained, potentially pushing prices for the precious metal higher.

“You really can’t have solar without some silver in those panels,” Kevin DeMeritt says. “Because there’s this drive for green energy around the world, solar has grown, and so has the demand for silver.”

Platinum’s Future Prospects, According to Lear Capital

Platinum, too, has seen greater interest in recent years, for a number of reasons — such as its ability to help create hydrogen, a key element in the European Union’s plan to reduce carbon use and fossil fuel dependence.

Efforts are currently underway in some member nations to produce hydrogen. Mining Weekly, for example, reported up to 1,350 tons of green hydrogen can be generated annually in Germany’s Wunsiedel Energy Park from renewable solar and wind power via a mechanism that relies on platinum.

While the precious metal is also used in items ranging from jewelry to bulk chemicals, a large portion of what’s generated goes toward the production of catalytic converters for cars and other vehicles.

Catalytic converter manufacturing is, in fact, the top application for platinum-group metals in the U.S., according to a 2020 U.S. Geological Survey report — and the global catalytic converter market is projected to increase by more than $6.5 billion within the next few years.

“It’s a fairly versatile metal with a lot of different industrial applications,” DeMeritt explains. “Most come in the form of a catalytic converter, which is used to reduce emissions in automobiles. With the green economy, everybody wants to continue to do that, so the demand there will continue. I don’t think we’re going to have enough electric cars to take that away for the next 10 or 15 years.”

The platinum supply, however, isn’t expected to grow quite as quickly as the metal’s use. The amount of platinum — which is considered to be about 30 times rarer than gold — that is mined each year totals less than 7% of the amount of gold that’s excavated, according to Lear Capital.

As a result, platinum physical precious metal asset investments can carry significant value. Take American Platinum Eagle coins, for example. First issued in 1997, they are composed of 99.95% pure platinum — and have the highest face value of any U.S. coin in history, $100. 

What’s Ahead for Platinum and Silver

In the coming months, the location of some silver and platinum mines could present production output challenges. 

In addition to concerns about the impact of mining industry regulatory changes that Reuters reported the government approved earlier this year in Mexico — the biggest global silver producer — security can be an issue; production was halted at one mine following an armed robbery this month. Some mining operations in Peru, the second-largest silver producer in the world, have paused production due to political protests and blockades.

The bulk of mined platinum, according to Kevin DeMeritt, comes from South Africa and Russia. With the continued conflict between Russia and Ukraine, DeMeritt says supply chain issues could possibly reduce the available amounts of that metal in the future.

“We have some supply issues with platinum because it’s relatively limited, with the majority of the world’s platinum coming from just a few countries,” he says. “Russia, because of this war, is not supplying the market with the same amount of platinum they typically would.”

The reduction, Kevin DeMeritt says, may not be permanent, but it could have an effect for some time.

“I don’t think anybody is saying we’re not going to see [Russia’s silver supply] at some point; it’s just not on the market and available now,” he says. “[But] I would suspect that over the next 16 to 28 months, you probably will not see that supply come onto the market, even if this conflict is resolved.”