Silver Prices: 10-Year Price Analysis And Production-Demand-GDP Dynamics

After remaining subdued at the $14-$16 per ounce range in the first half of 2019, silver prices saw an uptick to reach close to $20 in mid-2019 due to a reduction in interest rates in the US. However, with the global economic growth slowing down, lower industrial demand for silver has led to a drop in prices close to $17/ounce at the end of September 2019. Silver has had its fair share of volatility in the last 10 years, with prices ranging from $14/ounce to $50/ounce between 2009 and 2018.

You can view the Trefis dashboard – Silver Prices: 10-Year Price Performance And Production-Demand-GDP Analysis – to better understand how silver prices have moved compared to global production of and demand for the metal, along with price movement vis-à-vis world GDP and interest rate movements.

Silver Price Movement Over Last 10 Years

  • Silver prices have seen a lot of volatility over the last 10 years, with price sharply rising from 2009 to 2011, mainly driven by rising investment demand for the metal in the wake of the global financial crisis, which was followed by lower interest rates due to quantitative easing (QE).
  • Prices even reached $50/ounce in April 2011 (though annual average was $35 for the year), when S&P issued a “negative” outlook on the U.S.’s “AAA” (highest quality) sovereign-debt rating for the first time.
  • However, with positive steps from the government to avoid a major debt-crisis, silver prices started to decline from 2012.
  • Strong recovery in the US economy and tapering of the QE program led to a continuous drop in silver prices as an almost complete lack of inflationary pressure led to the rise in financial asset prices creating big opportunity cost for those who had looked to silver as a store of value instead.
  • Silver prices have remained subdued from 2015-2018, with average annual price/ounce ranging from $15.68 to $17.14 during this period of economic growth.

Production And Geographic Distribution

  • Mexico overtook Peru to become the largest producer of silver in 2010 and has maintained its leadership position since then, accounting for 23% of the world’s total silver production as of 2018.
  • The top 4 producers (Mexico, Peru, China, and Russia) account for over 58% of the world’s silver production.
  • This also indicates that silver production is not largely concentrated in a particular part of the globe, but is instead spread out with large mines in the Americas, Europe, and Asia.

Demand-Supply Dynamics

  • Mine production constitutes over 85% of total silver supply in the market, followed by scrap supply.
  • Unlike gold, silver has a much larger industrial application, with the metal being used for soldering and brazing alloys, batteries, dentistry, glass coatings, LED chips, medicine, nuclear reactors, photography, photovoltaic (or solar) energy, RFID chips (for tracking parcels or shipments worldwide), semiconductors, touch screens, water purification, etc.
  • Industrial application accounts for about 56% of total silver demand.
  • Silver supply has witnessed volatility over the last 10 years, in line with demand conditions.
  • Supply decreased from 2010 to 2013, mainly due to reduction in supply of scrap. However, during this period, mine supply was continuously rising as companies tried to supply larger quantity to meet the booming demand from photovoltaic, and take advantage of higher prices.
  • Mine production dropped for the first time in 2016 driven by lower by-product output from the lead/zinc and gold sectors, as well as a sharp decline of scrap supply to the market.
  • Mine supply further reduced in 2017 and 2018, as the Guatemala high court suspended the license of its largest, Escobal, mine and operational and maintenance disruptions in Canada.
  • However, higher scrap supply and production in China and India did not lead to a sharp drop in total supply.
  • At the same time, the investment demand for the metal decreased from 2016 with a pick up in the economy and expectations of higher interest rates. Though increased industrial demand led to almost stable demand levels in the last three years.

Surplus/(Deficit) And Price Movement

  • Based on the supply-demand dynamics above, silver has been in deficit for 6 of the last 10 years.
  • Prices have largely followed an inverse relation to surplus/deficit over most of the years.
  • However, during the 2012-2015 period, silver prices declined in spite of supply deficit during these years.
  • This was mainly due to most of the supply drop being driven by reduction in lower quality scrap sales, whereas, higher quality silver bars were enough to meet rising demand from the industrial sector.
  • Additionally, silver futures also took a hit with a recovery in the global economy and tapering of the excess liquidity injected in the system earlier.
  • Thus, this was a period during which the price trend looks decoupled from silver supply-demand movement.

GDP-Price Trend

  • Silver prices have largely maintained an inverse relation with the world GDP growth rate.
  • Though growth shot up in 2010, prices also increased mainly due to investment demand on the back of lower interest rates across the globe.
  • However, in 2011 and 2012, prices remained elevated with a drop in world GDP due to the Eurozone crisis.
  • Since 2014, as the global GDP growth stabilized around 3.4% to 3.6%, silver prices also remained range bound between $15 to $20 per ounce.
  • The case of GDP-silver price dynamics has been slightly complicated, as a drop in growth rate fuels investment demand for silver,  whereas a pick up in growth drives higher industrial demand for the metal.
  • Thus, we see a couple of years when silver does not maintain a clear inverse relation with GDP, unlike gold.

Interest Rates-Price Trend

  • As about 56% of silver demand is driven by industries, the metal’s quality of being a good hedging instrument is much lower than gold.
  • That is the reason, it does not depict a clear inverse relation with movement in interest rates.
  • Though, in the last two years (2017-2018), prices have moved lower with a rise in interest rates as still some proportion of demand comes from jewelry and investment in the form of coins/bars.
  • However, silver price has multiple drivers which makes its price dynamics with GDP and interest rates very different from that of gold.


  • Considering the volatility in silver prices over the last 10 years, it is anybody’s guess how the prices could move going forward.
  • Though the general market consensus seems to suggest that we are unlikely to see a major movement in silver prices in the near term.
  • The primary drivers for price stability in the $16-$19 range in the near term include investment demand in the face of decreasing interest rates in the US, increasing sales of electric vehicles, offset by industrial slowdown in China, and fear of a global economic slowdown which could decrease industrial demand for silver.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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