BMO says silver’s solar boom is fading, investment demand unlikely to compensate

Key Points:

• Gold prices fell over 1% due to concerns that rising inflation will prompt the Federal Reserve to raise interest rates aggressively, while silver outperformed with prices above $51 an ounce, up 0.68%.
• BMO Capital Markets projects the gold-silver ratio to rise structurally to around 85 points over the next four years, driven by weakening industrial demand for silver, particularly from the solar sector.
• The solar industry's rapid growth has led to a glut in renewable energy capacity, limiting further demand for silver used in photovoltaic applications, and manufacturers are reducing silver usage or replacing it altogether.
• Silver's price surge to $120 an ounce earlier this year has incentivized solar manufacturers to reduce silver content, contributing to a potential reversal of years of supply deficits and leading to an expected consumption surplus by 2030.
• BMO warns that investment demand alone may not offset declining solar demand, requiring exceptionally strong and sustained investor absorption of surplus silver to maintain or increase current high prices.