Silver Ceiling: Why Solar May Cap the Precious Metal’s Run

Precious metals like gold and silver are often viewed primarily as monetary assets, leading many investors to monitor the gold-to-silver ratio to gauge relative value. While silver is historically more volatile than gold, it is prone to aggressive rallies where it overshoots, as seen in 1998, 2011, and the recent surge over the last few months.

Source: FactSet

However, unlike gold, silver’s trajectory is also dictated by its heavy industrial footprint. In 2025, industrial use accounted for 61% of total silver demand, dwarfing the contributions from jewellery (21%) and investment coins and bars (18%).

Source: World Silver Survey 2025

While total silver demand has grown at a modest 1.8% annually over the last decade, its internal composition has shifted dramatically. The photography industry, once a dominant driver of silver demand, has been in structural decline since its 1999 peak. Conversely, driven by China’s aggressive renewable energy push, solar panel manufacturing has become the dominant engine of growth. Demand in this sector has climbed 10% per annum, rising from just 7% share of total silver demand a decade ago to 17% today.

Source: World Silver Survey 2025

With silver's large industrial consumption led by surging demand from solar photovoltaic manufacturing, investors should look beyond the gold-to-silver ratio and instead monitor the silver-to-copper ratio, which currently sits near all-time highs.

Source: FactSet

Solar manufacturing is a high-volume, low-margin business particularly sensitive to these costs. Today, silver represents roughly 29% of a finished module's expense, up from around 8% ten years ago. This cost pressure has forced industry leaders like JinkoSolar, Trina Solar, and LONGi to reach a critical juncture to redesign their manufacturing process or face margin collapse.

Manufacturers are now aggressively substituting silver for copper, particularly within Heterojunction technology. By utilizing silver-coated copper pastes, producers are already cutting silver consumption by 50%, with a clear roadmap to 90% reduction. The shift is accelerating toward total elimination; Aiko Solar has already launched silver-free lines, while LONGi Green Energy targets mass production of silver-free cells by Q2 2026.

While silver’s monetary status may provide a price floor amid economic uncertainty, its industrial ceiling is being lowered by the solar industry. The silver-to-copper substitution is essential for solar manufacturers to survive margin pressures. As these companies successfully decouple their production costs from silver, the metal stands to lose its single largest source of demand growth. For investors, this dynamic raises the prospect that silver's recent peak may mark a medium-term high, as the industry's accelerating transition to copper fundamentally alters its global demand outlook.