It may be silver's turn to shine after the gold rush to record high prices

By Myra P. Saefong

$35 to $50 silver prices may become a 'real possibility' this year: analyst

Gold has generally outpaced performance in silver over the last few years, but the tide may soon turn in favor of silver.

Forecasts pointing to a fourth straight yearly deficit in global supplies and a rise in demand to its second-highest level on record raise the potential for silver prices to rally, and even roughly double before the end of 2024.

"Naturally, there will be growing interest in silver the higher the gold price goes," said Peter Spina, founder and president of investor websites GoldSeek.com and SilverSeek.com.

'Naturally, there will be growing interest in silver the higher the gold price goes.'Peter Spina, GoldSeek.com

Gold futures (GC00) (GCM24) settled at $2,238.40 an ounce on Comex Thursday, the highest finish on record. Silver futures, meanwhile, rose to a 2024 high of $25.975 on March 21- nowhere near its record intraday high of $50.36 from Jan. 18, 1980, according to Dow Jones Market Data.

"Gold prices are already breaking out to record highs," said Spina. Silver, meanwhile, "traditionally lags and has been doing so for some time."

But the "window is closing," he said. "The opportunity to buy 'poor man's gold' is ending and from a technical perspective, we are likely to see a huge price acceleration" in silver (SI00) (SIK24) in the coming quarters.

Gold's sister metal

Indeed, silver is known as "poor man's gold" - a cheaper alternative among precious metals that also happens to serve an important purpose as a conductor in industrial applications.

Silver's seen "less as a storage-of-value asset" than gold," said Katy Kaminski, chief research strategist at alternative investment manager AlphaSimplex.

Given the "high level uncertainty with high valuation in equity markets, the threat of inflation and the need for value storage and diversification, gold is more positively positioned than silver as a safe-haven asset," she said. Silver is also more widely used in industrial production, and with production and manufacturing having somewhat decreased, especially in China, it's "not surprising that silver is lagging gold."

Read: Record gold price flashes warning for Fed's rate-cut hopes

Jena Santoro, senior manager of intelligence solutions at Everstream Analytics, said gold has been outperforming silver since 2016. This is a long-term trend likely driven by end-use applications and their relative value," she said.

That trend of gold outperforming silver, however, could always be reversed as silver has a broader range of industrial uses than gold, Santoro said.

Based on the performance of futures prices for both gold and silver, that's currently not the case, but silver futures may outpace gold this year and potentially hit a 10-year high around $30 an ounce due to renewed demand for silver in industrial uses, Santoro said.

This year "may be the year that the reversal takes place in silver's favor," she said.

Supply deficit

Spina pointed out that forecasts for a continuing supply shortage will lead to "serious stresses on physical inventories."

Global silver demand is forecast to climb by 1% to 1.2 billion ounces this year, which would be the second highest on record, according to The Silver Institute, attributing the rise to "stronger industrial offtake."

Global silver supply this year, meanwhile, is forecast to grow by 3% to an 8-year high of 1.02 billion ounces, it said, led by mine output - which is expected to rise by 4% to 843 million ounces - the highest since 2018.

The Silver Institute forecasts a silver supply deficit for a fourth year in a row, with 2024's deficit seen at 176 million ounces.

Annual global supply of silver has been "relatively unchanged" over the past 10 years at approximately 1 billion ounces, Imaru Casanova, portfolio manager, gold and precious metals, at VanEck, wrote in a recent note.

But data from The Silver Institute reveals growing demand for silver used in photovoltaics, which convert sunlight to electricity. That shows growth in solar installations is one of the main global sources of renewable energy, Casanova said.

The implications for silver are clear, with increased solar photovoltaics demand over the next five years and beyond, "unlikely to be matched by an increase in supplies," said Casanova, This growing demand from solar applications is substantial to an industry that is "very inelastic when it comes to the supply side."

'Screaming buy'

So while gold prices have been headline news, keep an eye on silver.

Silver futures for May delivery settled Thursday at $24.92 an ounce on Comex. Prices based on the most-active contracts were up nearly 3.5% for the first quarter, after posting a 7.3% climb for the fourth quarter of 2023.

"Not only do we have mandated green energy demand for silver facing a structural supply deficit, the historical perspective of gold-to-silver shows a massively undervalued silver price," said Spina.

From a monetary standpoint, the gold-to-silver ratio near 90 ounces - meaning it would take 90 ounces of silver to buy ounce of gold - is a "screaming buy for silver," he said.

Spina said it's likely that silver prices will see a breakout price move above $26-plus as the metal plays catch up to gold. Speculators and investors are then likely to flock back to silver, "squeezing existing inventories and flipping the switch" on the excess silver that has been "bleeding out" of exchange-traded funds, he said.

When Western sellers turn into buyers, it will become a "competitive market for supplies and $35 [to] $50 an ounce...becomes a real possibility this year," said Spina.

-Myra P. Saefong

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03-29-24 0700ET

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