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Executive Summary

The silver market is currently in a dynamic state, characterised by a combination of supply constraints, robust industrial demand, and evolving investor sentiment, making it a focal point for both market participants and analysts. Silver mine production, which peaked at 837 million ounces in 2022, is expected to decline slightly by 1% to 824 million ounces in 2024. This anticipated reduction in supply, coupled with stable recycling levels of 179 million ounces, suggests that the market could face tightening conditions, especially as demand pressures continue to grow.

On the demand side, industrial usage of silver remains a key driver, particularly in the rapidly expanding photovoltaic (PV) sector. Industrial demand is projected to increase by 9% in 2024, reaching 711 million ounces, with the PV sector alone expected to consume 232 million ounces—a 20% increase from 2023. This surge in demand is driven by the mass production of N-type solar cells, which require higher silver loadings, as well as the broader adoption of green technologies. The electrical and electronics sector is also expected to grow by 9%, further contributing to the robust demand outlook.

As a result of these factors, the silver market deficit is anticipated to widen significantly, increasing by 17% to a deficit of 215 million ounces in 2024. This would mark the fourth consecutive year of a supply shortfall, with the deficit driven by strong industrial demand outpacing the available supply. The persistent market imbalance is expected to exert upward pressure on silver prices, which could reach between $30 and $48 per ounce, according to various analysts.

Investment demand for silver has shown significant fluctuations over the past decade, with notable peaks during periods of heightened economic uncertainty. In 2022, investment demand surged, driven by geopolitical tensions and inflation concerns. However, 2023 witnessed a decline, likely due to profit-taking and shifts in investor focus. Despite this, a recovery in investment demand is anticipated in 2024, supported by expectations of a potential rate-cutting cycle from the US Federal Reserve. The net investment in Exchange-Traded Products (ETPs), which saw a decline in 2022 and 2023, is forecasted to rebound, reflecting renewed investor interest in silver as a hedge against economic uncertainty.

The geopolitical landscape and monetary policy decisions will play critical roles in shaping silver's market trajectory. With global policies increasingly emphasizing low-carbon strategies, silver's role in green technologies, such as solar energy and electric vehicles, is becoming more pronounced. As these sectors continue to expand, silver's industrial demand is poised for sustained growth, reinforcing its dual role as both an industrial and precious metal.

The table provides a snapshot of silver's price performance on the MCX (in INR) and in USD, along with the US Dollar Index, highlighting significant volatility over various periods influenced by global economic factors and investor sentiment.In the past week, silver prices have shown an upward trend, with MCX Silver rising by 3.31% and Silver in USD by 5.67%. This increase is likely driven by a surge in safe-haven demand amid geopolitical tensions and concerns over economic slowdowns. The decline in the US Dollar Index by 0.79% further supported this rise, as a weaker dollar typically boosts silver's appeal to investors. However, over the one-month period, both MCX Silver and Silver in USD saw declines of -11.34% and -7.14%, respectively. This drop can be attributed to profit-taking after previous gains and stronger US economic data, which bolstered the dollar and reduced silver's attractiveness.Over the last six months, silver has performed robustly, with MCX Silver up by 16.70% and Silver in USD by 26.36%, reflecting ongoing inflation concerns and sustained demand from the green technology sector, particularly photovoltaics.Year-to-date, MCX Silver has gained 11.80%, and Silver in USD has surged 21.98%, supported by a relatively weaker dollar, as indicated by the modest 1.16% increase in the Dollar Index. Overall, silver's price movements illustrate short-term volatility driven by market sentiment and strong long-term gains fueled by macroeconomic trends and industrial demand.

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