abrdn Silver ETF Trust

This section provides a brief introduction to the silver industry by looking at some of the key participants, detailing the primary sources of demand and supply and outlining the role of the “official” sector (i.e., central banks) in the market.

In this annual report, the term “ounces” refers to troy ounces.

Market Participants

The participants in the world silver market may be classified in the following sectors: the mining and producer sector, the banking sector, the official sector, the investment sector, and the manufacturing sector. A brief description of each follows.

Mining and Producer Sector

This group includes mining companies that specialize in silver and silver production, mining companies that produce silver as a by-product of other production (such as a copper or gold producer), scrap merchants and recyclers. According to The Silver Institute’s World Silver Survey 2024, the top 20 producing countries are set forth in the table below. As the World Silver Survey 2024 was published in April 2024, information for 2024 is not available as of the date of this report.

Source: The Silver Institute - World Silver Survey 2024 (Metals Focus)

Banking Sector

Bullion banks provide a variety of services to the silver market and its participants, thereby facilitating interactions between other parties. Services provided by the bullion banking community include traditional banking products as well as mine financing, physical silver purchases and sales, hedging and risk management, inventory management for industrial users and consumers and silver leasing.

The Official Sector

There are no official statistics published by the International Monetary Fund, Bank of International Settlements, or national banks on silver holdings by national governments. The main reason for this is that silver is generally not recognized as a reserve asset. Consequently, there are very limited silver stocks held by governments. According to The Silver Institute World Silver Survey 2024, the identifiable silver bullion inventories are as set forth in the table below. As the World Silver Survey 2024 was published in April 2024, information for 2024 is not available as of the date of this report.

*Year-end; Source: The Silver Institute - World Silver Survey 2024 (Metals Focus, LBMA, CME, SGE, SHFE, MCX & OSE)

The Investment Sector

This sector includes the investment and trading activities of both professional and private investors and speculators. These participants range from large hedge and mutual funds to day-traders on futures exchanges, and retail-level coin collectors.

The Manufacturing Sector

The fabrication and manufacturing sector represents all the commercial and industrial users of silver. Industrial applications comprise the largest use of silver. The jewelry and silverware sector is the second largest, followed by the photographic industry (although the latter has been declining over a number of years as a result of the spread of digital photography).

World Silver Supply and Demand 2014-2024

The following table sets forth a summary of the world silver supply and demand for the period from 2015 to 2024 and is based on information reported by the World Silver Survey 2024, published by The Silver Institute. As the World Silver Survey 2024 was published in April 2024, the table below includes forecasted information for 2024 as of date of publication. As of the date of this report, final figures (i.e., non-forecasted) for 2024 are not yet available.

*Forecasted

Source: The Silver Institute - World Silver Survey 2024 (Metals Focus)

The following are some of the main characteristics of the silver market illustrated by the table.

The balance between silver supply and demand is a fundamental driver of its price. Silver has some of the same drivers of investment demand as gold, in that it can be used as a hedge against inflation or currency devaluation, or for portfolio diversification as an alternative currency. As such, silver investment demand may be influenced by interest rates. Silver, unlike gold, has a significant demand for industrial applications, such as electronics, solar panels, and medical equipment, due to its unique properties, such a high thermal and electrical conductivity.

New mine production accounts for approximately 84% of total silver supply. Recycled silver accounts for around 18% of total supply.

Industrial applications and jewelry demand accounted for over 72% of total demand in 2023. Photography has been taking a lower share of overall silver demand falling from 4% in 2015 to 2% in 2023, while photovoltaic demand has risen in recent years accounting for 16% in 2023. Net physical investment (i.e. in coins and bars) accounted for 20% of demand in 2023, up from a low of 26% in 2021–2022.

The price of silver is volatile and fluctuations are expected to have a direct impact on the value of the Shares. However, movements in the price of silver in the past are not a reliable indicator of future movements. Movements may be influenced by various factors, including announcements from central banks regarding a country’s reserve silver holdings, agreements among central banks, political uncertainties around the world, and economic concerns. The following chart illustrates the movements in the price of an ounce of silver in dollars from December 31, 2014 to December 31, 2024 and is based on information provided by Bloomberg:

Source: Bloomberg, abrdn. Chart data from 12/31/2014 to 12/31/2024. Spot Silver Price = SLVRLND Index.

The following is a discussion of the movements in the price of silver illustrated by the table:

Starting in early 2011, when silver prices peaked at $48.44 per ounce, silver prices began a downward trend, albeit with multiple upwards rallies (that have often lasted several months). The rise in the value of the U.S. Dollar, sluggish industrial growth and a tame inflation environment (which led some investors to revise their expectations of the effects of monetary expansion) were some of the drivers behind the fall in silver prices from 2011 to 2019. Silver reversed course in 2020, as prices rose 46.75%, closing at $26.49 per ounce. In 2021, silver took a slight step back after its historic performance in 2020, as it returned -13% (as of December 31, 2021). Throughout 2021, silver took a backseat to riskier asset classes, such as equities, which was one of the reasons for its negative performance during the year.

2022 was a volatile year for silver. On March 7, 2022, in response to Russia’s invasion of Ukraine, the LBMA suspended five Russian silver refiners. Fewer suppliers to the LBMA may lead to a lower supply of Good Delivery silver and further volatility in the price of silver. See “Risk Factors—General Risks— War, a major terrorist attack and other geopolitical events, including but not limited to the war between Russia and Ukraine…may lead to extended periods of price volatility” for additional information regarding the LBMA’s suspension of the Russian silver refiners. The price of silver reached as high as $26.41 per ounce in the weeks following Russia’s invasion of Ukraine, up more than 13% from the end of 2021, as the invasion, and the threat of sanctions on Russian exports, including silver, pushed prices higher. The price of silver fell as low as $17.81 per ounce at the beginning of September 2022, as the risk of diminishing global economic growth, and aggressive interest rate hikes by the U.S. Federal Reserve caused the U.S. Dollar to strengthen, and silver prices to weaken, in concurrence with a slowing economy. The potential of a weakening U.S. Dollar, amidst low silver inventory levels and a reopening Chinese economy, sparked a rally in the fourth quarter of 2022 that saw the price of silver climb 25.9% over the quarter to close the year at $23.95 per ounce as of December 31, 2022. Despite the volatile year, in 2022 the price of silver rose 2.8% above its 2021 closing price.

The strong demand and reduced supply trends that were prevalent towards the end of 2022 were expected to continue in 2023; however, economic and geopolitical factors continued to drive volatility in the price of silver over the course of the year. While the spot price remained relatively flat to start the year, a disappointing Chinese economic recovery drove the price as low as $20.09 on March 10, 2023, before a U.S. banking crisis increased the likelihood of U.S. policy rate cuts and drove the spot price as high as $25.84 per ounce on May 5, 2023, as investors turned to silver in anticipation of lower interest rates. However, the subsequent interest rate hike in May contributed to the price of silver falling as low as $22.34 per ounce on June 23, 2023. The price of silver continued to fluctuate throughout the third quarter of 2023 as a weaker dollar pushed the spot price back above $25 per ounce on July 19, 2023; however, the U.S. Federal Reserve’s final interest rate hike of the year on July 26 increased the probability of a policy rate mistake, given mixed economic news, leading the price to close as low as $22.55 per ounce on September 28, 2023. The spot price of silver continued to fall at the start of Q4 2023, reaching as low as $21.06 per ounce on October 3, 2023, before the U.S. Treasury shifted issuance to short duration bonds, lowering 10-year yields. As Treasury market yields moved lower, removing the risk of excessive policy-rate tightening, the price climbed to $23.22 per ounce on October 20, 2023. The spot price of silver remained relatively steady over the next few weeks before speculation of potential interest rate cuts in the U.S. and Chinese economic stimulus drove the spot price of silver as high as $25.17 per ounce on December 4, 2023. The price of silver ultimately ended the year at $23.79 per ounce on December 29, 2023, down -0.65% for the year, as market participants were disappointed by the lack of economic stimulus in China.

In 2024, the spot price of silver began the year on a downward trend as the economic stimulus out of China at the end of 2023 disappointed investors and had little immediate effect on the economy. The potential for U.S. interest rate cuts inspired some increased attention by investors over the summer months. The U.S. Federal Reserve’s interest rate cut provided an additional tailwind that would send the price as high as $32.48 per ounce on September 26, 2024. Headwinds grew as the US election resulted in an increased potential of tariffs that are large enough to slow Chinese economic growth. Overall, the year was marked by alternating optimism and pessimism on China’s economic activity and levels of stimulus. Additional volatility came from a disappointing energy transition in the U.S. despite an outperforming energy transition in China where silver’s use in solar panel manufacturing is key.