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Silver: From Monetary Metal to Industrial Powerhouse

  • Writer: MS Blogs
    MS Blogs
  • Dec 30, 2025
  • 5 min read

Updated: Jan 15


Silver is once again commanding attention. Prices are elevated, narratives are building, and interest across markets has intensified. Yet silver has never been a simple asset. Its behaviour is shaped by history, industrial relevance, and financial markets all at once. To understand where silver may head, it is essential to first understand what silver represents and why it behaves the way it does.


Silver’s History and Significance


For centuries, silver played a central role in global commerce. Long before modern financial systems emerged, silver was widely used as money. Empires minted silver coins, trade routes relied on silver settlements, and everyday economic activity was conducted using silver as a medium of exchange.

Silver’s importance stemmed from its physical characteristics. It was durable, divisible, and relatively abundant compared to gold, making it practical for widespread monetary use. As a result, silver became deeply embedded in economic systems across Europe, Asia, and the Americas.


This long history established silver as a metal of trust, value, and utility. However, unlike gold, silver always carried a practical side beyond money. It was never just a reserve asset. This dual identity would later define its evolution.


The 1873 “Crime of Silver” and the Shift Toward Industry


A defining moment in silver’s history came in the late 19th century. The Coinage Act of 1873 in the United States effectively demonetised silver, moving the global monetary system toward a gold-dominated standard. This event, often referred to as the “Crime of Silver”, marked the beginning of silver’s gradual exit from formal monetary systems.


Despite silver losing its role as legal money, its relevance did not disappear. Instead, it transformed. Through the late 1800s and into the 1900s, silver increasingly found use in photography, electrical contacts, chemical processes, and industrial applications.


By the mid-20th century, silver had firmly transitioned from being primarily a monetary metal to becoming an industrial input with residual monetary perception. This shift laid the foundation for the way silver behaves in modern markets.


What Is Driving Silver Demand Today


The current interest in silver is largely rooted in its industrial importance. Silver has the highest electrical conductivity among all metals, making it difficult to substitute in high-precision applications.


Key demand drivers today include:

  • Electronics and advanced circuitry

  • Semiconductors

  • Solar panels, where silver is essential for conductivity

  • Electric vehicles and battery systems

  • Medical applications


Samsung has published research on solid-state battery designs targeting significantly higher driving range (around 600 miles) and sub-10-minute fast charging. Reports suggest such designs could use up to 1 kg of silver per car, highlighting another potential incremental driver of silver demand if solid-state batteries scale commercially. 


As the global economy moves toward electrification, renewable energy, and advanced manufacturing, silver’s role has expanded meaningfully. Unlike precious metals that are primarily stored, silver is often used and embedded, reducing recoverable supply over time.


Supply Constraints in the Silver Market


Silver’s supply dynamics add another layer of complexity. Most silver production does not come from dedicated silver mines. Roughly 70% of silver is produced as a by-product of mining for base metals such as copper, lead, and zinc.


This structure means:

  • Silver supply does not respond quickly to higher prices

  • Production depends on broader base-metal mining activity

  • New mining capacity takes years to develop and is capital intensive


As a result of such demand drivers, periods of rising demand can create supply tightness, contributing to sharper price movements than seen in many other commodities.


Historical demand and supply breakdown

Figure 1


The Role of Markets and Financial Positioning


In addition to physical demand and supply, silver is deeply influenced by financial markets. Futures positioning, ETF flows, and macro expectations can all shape price behaviour, often amplifying moves beyond what near-term fundamentals alone would suggest.


The rise in gold prices, driven by central banks’ interest in finding alternatives to the dollar as a reserve asset, has spilled over into increased interest in silver. Silver’s lower absolute price compared to gold, combined with higher volatility, tends to attract speculative participation. This makes silver particularly sensitive to shifts in liquidity, positioning, and sentiment. Strong inflows can drive rapid rallies, while reversals can trigger equally sharp corrections.


Derivatives market mechanics can further accelerate price moves. The CME has raised margin requirements for silver futures during periods of heightened volatility, increasing the cash needed to carry leveraged positions. When margins rise, some participants are forced to reduce or close positions, which can intensify moves in either direction even without a change in physical demand.

As a result, silver prices often reflect not only fundamentals, but also the interaction between physical tightness and financial positioning.


Geopolitical and Policy-Driven Volatility


Beyond market mechanics, policy actions and geopolitical developments can introduce additional layers of volatility in silver.


Recent developments illustrate this clearly. China’s Ministry of Commerce has issued rules governing state-traded exports of silver for 2026–27, outlining application conditions and procedures and indicating that only approved, qualified enterprises will be able to export under this framework. Markets have interpreted this as tighter export access starting 2026, adding uncertainty around availability and contributing to near-term volatility.


Such policy signals do not necessarily alter long-term demand or supply immediately, but they can influence expectations, risk premiums, and short-term price behaviour.


What This Means for the Future of Silver


Silver’s future direction will be shaped by how its industrial demand evolves and whether silver remains hard to replace across key applications.


The demand forces to track


Solar build-out vs substitution:

Solar has been a major source of incremental power capacity over the past two decades. As long as silver remains a critical input in photovoltaic cells, continued solar deployment would support steady silver demand. However, this support could weaken if alternative energy sources such as nuclear or hydrogen gain share more rapidly, or if manufacturers materially reduce silver usage through substitution or alternative conductive materials.


Electronics and semiconductor:

Silver plays a foundational role across modern electronics due to its superior conductivity and reliability. Demand is driven by the cumulative expansion of consumer electronics, semiconductors, AI, and automation rather than any single product. This demand tends to be structurally resilient, as silver is used in small but critical quantities that are difficult to substitute, though it remains sensitive to global growth cycles and efficiency-driven reductions in usage per unit.


EV ecosystem and energy storage:

Silver demand from electric vehicles and solar extends beyond the vehicles themselves to the broader electrification ecosystem, including charging infrastructure, power electronics, and grid upgrades, all of which are relatively silver-intensive. This supporting electrification infrastructure requirement can provide a steady source of incremental demand. In addition, progress in next-generation battery technologies, such as solid-state designs, introduces potential upside to silver demand, though the scale and timing of such applications will depend on commercial viability and cost economics.


The supply forces to track


Monitoring silver supply remains critical in assessing future price behaviour, as sustained higher prices can gradually improve mining incentives and recycling economics, though supply responses tend to be slow and uneven due to long development timelines and silver’s by-product nature.


Closing Thought


Silver can remain structurally supported if industrial demand continues to scale faster than substitution and supply response. However, its journey is likely to remain cyclical and volatile, shaped by the interaction between real-world consumption and financial market behaviour.


Silver occupies a unique position in the asset landscape. It carries the legacy of money, the relevance of industry, and the influence of financial markets. Understanding silver therefore requires more than tracking prices. It requires understanding its evolution, its role in today’s economy, and the forces that drive its cycles.


References:


Disclaimer-This article is for educational and informational purposes only and should not be considered as investment advice or a recommendation to buy or sell any securities or adopt any investment strategy.  

 
 
 

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© 2025 by M Stories Asset Management LLP.

 

M Stories Asset Management LLP 

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