Jeff Clark, Senior Analyst, GoldSilver.com
JAN 19, 2021
Whether you’re happy about it or not, Joe Biden will take the presidential oath of office on Wednesday, January 20. But while it’s the official induction of a new president, the real inauguration will be for one of our favorite metals, the one that is the most versatile and vital for the world we live in today: silver.
That’s because President Biden’s policies will be a boon for demand—both industrial and monetary.
Here’s a look at what is in store for silver, which is likely to start the day he takes the oath…
While the exact budget has yet to be finalized, we have a fairly good idea of what to expect from Biden’s economic stimulus plans. This is especially the case now that prior Fed-chair Janet Yellen is Treasury Secretary, and self-proclaimed socialist Bernie Sanders is Budget Chairman.
First comes his “Rescue” plan, and next month a “Recovery” plan, where his focus on clean energy and infrastructure will see the jump in silver demand.
Based on public statements, here’s some of what the Biden administration wants to do, and how it will require an ever increasing amount of silver…
Push the country toward more hybrid and electric cars
This includes incentivizing auto companies to offer more zero-emission vehicles. And guess what vehicle types use more silver?
The average internal combustion engine (ICE) vehicle uses an estimated 15-28 grams of silver per vehicle. But an electric vehicle (EV) uses 25-50 grams of silver per vehicle. So manufacturing an EV requires nearly twice as much silver. Hybrid vehicles use 18-34 grams of silver per vehicle. This all may not sound like a lot, but the Silver Institute estimates that the automotive sector will gobble up as much as 90 million ounces of silver annually by 2025.
Why is there more silver in electric cars? Because silver has superior electrical properties, making it ideal for the various components that EVs use more of than ICE vehicles—batteries, for example. More EVs = more silver demand.
It’s also true that all cars today use more silver than they did 10-20 years ago. It’s used in infotainment systems, navigation systems, electric power steering, airbag deployment systems, automatic braking, and security and driver alertness systems.
In fact, the Silver Institute predicts that metal demand for the auto industry will increase so much that within the next four years silver will become the second largest source of industrial use.
We’re just getting started…
Invest in 500,000 electric vehicle charging stations
Almost every ancillary automotive service requires silver, including charging stations and charging points for electric vehicles.
There are approximately 29,000 public charging stations currently—if he hits his goal it would represent a 1,624% increase in the number of charging stations. Whatever it ends up being, more silver will be needed than currently goes for this use.
Upgrade millions of buildings to be more energy efficient
One sure way to do this is solar energy. Solar is a renewable energy source and emits no carbon emissions. And solar panels use a lot of silver. In fact, solar is already the largest component of industrial demand for silver—and it’s about to need more.
The amount of silver used in solar panels can vary, but a fair average is about two-thirds of an ounce. We put 23 solar panels on our roof last year, so we used 14.8 ounces of silver.
Solar use—and therefore silver demand—will definitely jump with Biden’s clean energy initiatives. But the increase won’t all come from government initiatives: solar costs less, and can be installed faster than most other energy sources. This makes it especially appealing to second and third world countries; both China and India are on track to see a significant increase in solar capacity, too.
Add it all up and estimates show that solar power is expected to more than triple by 2030. The Silver Institute says the photovoltaic industry will use 98 million ounces this year alone—this is over half of Mexico’s annual silver output, the largest silver producing country in the world!
By the way, if the silver price gets too high, could it be reduced or even eliminated from renewables? For the most part, no. CRU International reported that “it bears repeating that silver has remarkable electro-conductive qualities unmatched by other metals, and there is a physical limit on the ability of solar PV manufacturers to continue reducing silver loadings before performance and efficiency losses begin to outweigh whatever benefits are achieved from lower raw material costs.”
Build infrastructure for a green future including create green energy jobs
It’s not just solar but all renewables that will likely be part of Biden’s green plan. Windmills use silver, too. Brushes that contain silver are used in the motors and generators of wind turbines. Copper versions of the brushes have been popular, but many end users are switching to silver brushes, which, although more expensive, perform better long term.
All told, renewables are expected to increase to a whopping 4.5 times their current level by 2030, expanding their share of global electricity generation from 6% to 14%. And by 2050 it is estimated solar panels and wind turbines will require three times more silver than what is used today. This means more and more silver will be gobbled up by these industrial users.
And while controversial for some, nuclear is also a clean energy source. Unbeknown to many people, nuclear power plants use silver, too.
Silver is used (with other metals) to produce control rods for nuclear reactors. While the amount of silver per rod is small, it is a vital component. The amount of silver in a reactor can vary, but the average reactor contains 20 individual rods, which amounted to about 56 thousand ounces of silver for the industry last year.
And the rods in the newer nuclear plants contain more silver. That’s why CRU International says demand for silver from this industry will undoubtedly grow. (There is a low rate of replacement for the rods, though, so the growth will primarily come from new nuclear plants being built.)
And by the way, it’s not just Biden that will push demand for silver higher. Other countries, of course, have their own “green” plans. The IMF said it hopes the G20 will coordinate their plans—if they do the growth in green infrastructure would be two-higher than if each country acts on its own. The green movement is growing worldwide—and it will require more and more silver.
Build 1.5 million new sustainable housing units
While green technologies use many metals, silver is a key element that makes them what they are. As a result, more silver will be needed as more “sustainable” housing is built.
There are other things that have been mentioned too, like “cleaning up pollution from oil and gas wells and coal mining sites” and “creating more public transit,” both of which will use devices, switches, products, etc., that contain silver.
There’s little doubt that industrial demand for silver will rise as a direct result of Biden’s initiatives.
But that’s not all…
The first stimulus package Biden is proposing (the “Rescue” plan) is in the range of $1.9 trillion. And then will come his “Rescue” plan, the amount unknown as I write.
But there’s something important to point out here: the difference between these stimulus plans and quantitative easing or “monetary” stimulus is that this is fiscal spending. In other words, these are funds that will be injected directly into the economy and immediately spent. Monetary stimulus, on the other hand, usually goes first to the banking system and ends up inflating asset prices. It’s like me giving you $100 and you deposit it in a savings account vs. spending it that day on groceries.
You probably don’t need me to say it, but the U.S. doesn’t have $1.9 trillion for Biden’s plan. It already can’t balance a budget. Some claim they’ll “collect” on the backend; as jobs are created and the economy grows, tax revenue will increase. But the debts and deficits are so high now they’re mathematically unpayable. And history says they will lead to inflation (higher consumer prices).
Where will they get the funds for these stimulus programs? I’ll give you three guesses: they’ll have to create it (digital and otherwise), which will add to the already bloated deficit.
It only takes a 6th grade education to understand that the more you create of something, the less valuable it becomes. As more and more currency units are created for these massive spending plans, the US dollar will become less and less valuable—and silver (and gold) stand to benefit directly from it.
In fact, monetary stimulus alone is 95 times greater than annual silver production.
Now that the Democrats control all three branches of government, currency printing is sure to continue, and fiscal spending is certain to jump. Both of these things will have a direct impact on silver.
As the Biden administration pushes for a “greener” society, more and more silver will be needed. Silver helps make green technologies what they are.
And silver will undoubtedly respond to the ongoing monetary dilution that’s coming from the incoming crop of politicians and central bank authorities.
This one-two punch will have a direct impact on the silver market:
And greater demand has a very clear impact on price: higher.
Are you ready for silver’s inauguration day? With all that is expected over the next four years, it is not a stretch to say that silver could be the best performing asset.
(Follow Jeff on Twitter @TheGoldAdvisor)