While investors often know factors like silver and platinum only existing in finite amounts can influence their prices, they may not be aware that the push for green energy has also had a major effect on demand for the precious metals — and their overall value, according to Kevin DeMeritt, founder of Los Angeles-based gold and precious metals firm Lear Capital.
Platinum’s ability to help create hydrogen, for instance, has likely helped spur interest in the asset in recent years.
Hydrogen is a key element in initiatives like the European Union’s plan to reduce its carbon use and fossil fuel dependence. Environmentally friendly energy production is currently underway in locations such as Germany’s Wunsiedel Energy Park, where Mining Weekly reported up to 1,350 tons of green hydrogen can be generated annually from renewable solar and wind power via an electrolyser that relies on platinum.
“It’s a fairly versatile metal with a lot of different industrial applications,” DeMeritt says. “About 50% of platinum’s use is mostly industrial, and it has strategic applications.”
Platinum Ticks Upward
Since 1979, the automobile industry has been the largest consumer of platinum and related metals. In the U.S., catalytic converter production is the top use category for platinum-group metals, according to U.S. Geological Survey data.
With the global catalytic converter market expected to escalate from under $15 billion to more than $20 billion by 2027, platinum demand will presumably also continue to expand.
“Most of the industrial applications come in the form of a catalytic converter, which is used to reduce emissions in automobiles,” Kevin DeMeritt says. “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.”
With the bulk of the world’s platinum coming from just a few countries — including South Africa and Russia, which invaded Ukraine in 2022 and remains locked in conflict with the country — some supply issues have also arisen, according to DeMeritt.
“We’re starting to see demand for platinum increasing,” the Lear Capital founder says. “At the same time, Russia, because of this war, is not supplying the market with the same amount of platinum they typically would. Because we’re limited to those two countries for the majority of the platinum production, that could be an interesting play for long-term investors moving forward.”
A Similar Asset Value Proposition
Silver’s green energy-related applications are also helping to spark interest in the precious metal, which is most often used in electrical and electronic applications, according to the USGS, including some sustainability-based products.
Silver is, in fact, a central component in solar photovoltaic power production, which involves converting sunlight to energy and today comprises the top source of green electricity.
The focus on green energy in recent years has helped raise solar energy use to new levels. Between 2017 and the end of 2022, the U.S. essentially tripled its solar photovoltaic capacity, with another 63 gigawatts expected to be added by the end of 2024, which would increase the country’s solar abilities by 84%, according to a Deloitte report.
With the exception of 2020, when numerous industries experienced challenges due to the COVID-19 pandemic, the demand for silver steadily increased in the same five-year period.
Given some of the large-scale green targets that have been set — ranging from the EU’s Solar Energy Strategy goals, which involve generating more than 320 gigawatts of solar photovoltaic by 2025, to the United Nation’s intent to substantially increase the amount of renewable energy that’s produced globally — solar energy use, and the corresponding interest in silver, both seem likely to continue to grow in the future.
“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.”
Silver’s Current and Future Potential
Gold may sometimes be more of a focus for investors, since its storied history of being used as a form of currency for the past 5,000 years has helped make it a more widely recognized asset; however, silver can be a formidable contender, Kevin DeMeritt says, due to its ability to provide returns.
Even in challenging economic times, silver has historically retained or increased in value. During a previous high inflationary period in the U.S. in 1980, for example, silver’s price shot up 557%, according to a Lear Capital analysis.
“Today, central banks don’t hold silver; they hold gold,” DeMeritt says. “Gold just gets more attention from that aspect. But the advantages of silver today are starting to outweigh gold, [which] is really not an industrial asset. Silver is; batteries have silver, solar [systems have] silver in [them] — the industrial uses are just going through the roof, and you also have demand from other countries that are looking now past gold and starting to look at silver.”
Earlier this year, CNBC reported that silver may reach $30 an ounce —a nine-year high — this year due to supply shortages and a past pattern of outperforming gold when inflation is elevated.
“You have the industrial side of the market that’s starting to increase, and then you have the investment side of the market that’s also starting to look very, very good,” Kevin DeMeritt says. “The last time we had a recession, the price of silver went up about 350% [and] hit $47 an ounce.”
With concern about an impending recession and inflation yet to drop to the Federal Reserve’s desired 2% level — as of March, it stood at 5%, per the latest Bureau of Labor Statistics data — the interest in silver has already started to pick up; its current price means silver may offer one of the best opportunities to invest in precious metals right now, according to Lear Capital’s DeMeritt.
As of mid-May, “Silver’s just absolutely on sale,” he says. “The last time gold traded at this level, [around] $2,000, silver was $49 an ounce — and [it’s about] half of that [price] now. The silver market is an incredible opportunity for a long-term investor [who’s] looking, [in] the next three to five years, to get a great inflationary hedge — but also some great results with appreciation from the silver market.”