Through the first half of this year, silver experienced increased demand for jewelry and important industrial applications, two strong signals for demand growth, according to the Silver Institute.

Silver jewelry, a mainstay of silver demand, was strong in the first half of 2015. In the U.S., imports of silver jewelry jumped 11% through the end of May, as consumer desire for silver jewelry increased significantly this year. The U.S. is the largest importer of silver jewelry, as measured in dollar terms, and this demand impacts silver trade across Asia. U.S. imports from Thailand are up 18.5% through the end of May while China showed an increase of 14% in the same period. GFMS Thomson Reuters (GFMS), a precious metals consultancy, estimates that globally silver jewelry will grow 5% in 2015.

With almost 60% of silver demand tied to industrial use, silver’s role in industrial applications is looking brighter in several important areas. GFMS forecasts a 2% growth in industrial applications for silver this year.

In the renewable energy industry sector, the demand for silver by solar panel producers is expected to increase 8% to 65 million oz this year. The rise reflects increased solar cell production and a higher number of installations. The increase is due to the U.S., which had a 76% increase in solar installations in the first quarter of 2015 when compared to last year. China and India both have aggressive solar installation plans and are expected help drive this projected growth as well.

Silver demand from ethylene oxide producers is expected to increase to 8.6 million oz in 2015, which would represent a 61% increase over 2014. Most of this increase will be driven by Chinese demand. Ethylene oxide is a vital building block chemical, critical in the production of plastics, solvents, and detergents and a broad range of organic chemicals, and represents one more example of the unmatched importance of silver in industry.

Electronics demand is forecast to increase modestly in 2015, by 0.4%. A decline in silver demand by computer and tablet producers, by an expected 4.5% drop in shipments this year, should be partially offset by a 3% increase in mobile phone shipments in 2015.

Additionally, the silver market is expected to be in a deficit of 57.7 million oz in 2015, as supply contracts and physical demand grows. This would mark the third consecutive year that the market has been in a physical deficit. When the market experiences an annual shortfall from mine supply, users must draw down on above ground stocks, thereby tightening available supply.

On the investment side, retail investor demand for the white metal has been sturdy in the first half of 2015, in what has been a challenging precious metals investment market. Through July 24, global silver ETF holdings increased by more than 4.7 million oz in 2015, indicating that these investors likely have a more positive longer-term view of the silver price.

In the first half of the year, global bullion coin sales totaled 43.6 million oz, 6% below levels seen in the same period a year ago. However, in the first half of 2015, global sales were the fifth highest on record. The U.S. Mint, faced with a significant spike in investor interest, temporarily suspended sales of its silver bullion coins on July 7, after exhausting its inventory when investor demand in June surged 80% above the previous year’s June coin sales. The Mint resumed bullion coin sales on July 27 on an allocated basis. Similarly, Australia’s Perth Mint saw its silver coins sales spike in June due to a more attractive silver price, though sales overall are down 18% from the same period in 2014.

The gold/silver ratio, a simple measure of the metals’ relative prices calculated by dividing the price of an ounce of gold by the corresponding price of silver, has averaged 58 since 2000. The ratio averaged 73 in the first half of 2015, indicating that silver is underpriced relative to gold. This gives way to increased potential for buying in the silver market.

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