Robust demand from the solar industry and limited supply growth from mines will buoy silver prices once the period of higher global interest rates is over, analysts said.

Silver is both an investment and is consumed in the manufacture of jewellery, electronics and electric vehicles, as well as solar panels which has been gaining traction amid the global green energy transition.

However, silver prices at $23 per troy ounce, are down 4% so far this year as elevated global interest rates discourage investment in precious metals, which do not offer interest. The US Federal Reserve hardened its hawkish posture on interest rates last week.

"Once the peak of Fed tightening is confidently in place, silver should become attractive again," said Ed Moya, senior market analyst at brokerage OANDA. He expects silver to finish this year above $24 per ounce.

"Silver might see its biggest deficit in over a decade as mining production cannot keep up with demand. The solar industry has seen surging demand," he added.

The silver market was undersupplied by 237.7-million ounces in 2022, according to the Silver Institute, and deficits are set to continue in the years to come. However, huge above-ground stocks and quantities of metal held by individuals and investors fill the gap.

Demand for silver from photovoltaic cells (PV), which make up a solar panel, has shown a three-fold growth since 2014 and is expected to reach 161 million ounces in 2023, according to the Silver Institute.

The sector will be responsible for 14% of total demand for silver this year compared with 5% in 2014.

Demand from the sector could reach 170-180 million ounces if new PV installation exceeds 400 gigawatts (GW) by 2025, said Philip Newman at consultants Metals Focus.

However, solar panel manufacturers, having long been mindful of silver supplies after the price briefly hit $50 per ounce in 2011, will continue to reduce silver loadings through structural design improvements, Newman added.

Meanwhile, growth in mine production is largely beholden to other metals projects for which silver is a by-product, ANZ said in a note.

"We estimate the silver market is entering a period of tightness unseen for decades," ANZ said, estimating demand from the solar industry at 225-million ounces in 2025.