BMO sees solar demand weakening silver’s market outlook

BMO’s commodity team, led by George Heppel and Helen Amos, expects the gold-silver ratio to rise from 76 points currently to around 85 over the next four years, despite its recent decline. The analysts identify weakening industrial demand—particularly from the solar sector—as the main risk to silver.

They said renewable capacity has expanded faster than grids, interconnectors, batteries and other flexible-demand sources. That mismatch has contributed to a glut of renewable energy and is expected to slow demand for silver in solar installations. The metal’s price surge, which briefly took it above $120 an ounce earlier this year, has also encouraged solar manufacturers to reduce silver use or replace it. Silver intensity in photovoltaic production had already been declining, the analysts said.

Recent industrial demand had drawn down above-ground stockpiles, leaving the market more exposed to supply shocks and price volatility. That dynamic helped attract investors betting that prices would need to rise to meet demand. But BMO expects weaker solar consumption to reverse years of supply deficits. Its estimates point to a record consumption surplus by 2030, driven mainly by the reversal in solar demand.

The surplus will need to be absorbed, BMO said, likely requiring silver to trade at a sufficiently low relative price to attract investors. Investment demand will remain important, but the analysts warned it may not offset the decline in solar use. For prices to hold at current elevated levels and keep rising as solar demand contracts, investors would have to absorb an unprecedented quantity of surplus metal—and sustain exceptionally strong demand for years.