Silver's Shining Moment: The Underdog Metal Outpacing Gold
Adrian C. Spitters FCSI?, CFP?, CEA? President, Author, Private Wealth Advisor
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Source Article: Going for gold? Silver is shining brighter
A Glittering Opportunity in the Silver Market
While gold continues to capture headlines with its record-breaking rally, the often-overlooked silver is quietly stealing the spotlight, delivering impressive returns and outperforming its more glamorous counterpart.
Gold's record-setting rally may have captured the headlines this year, but it's silver that's running harder and faster as the less glamorous metal benefits from robust financial and industrial demand.
Silver has soared by almost a quarter in 2024, outpacing gold and making it one of the year's best-performing major commodities. Yet, in relative terms, silver is still cheap. It currently takes about 80 ounces of silver to buy 1 ounce of gold, compared with the 20-year average of 68.
The two metals move largely in tandem as both offer similar macro- and currency-hedging properties. With gold hitting a record on central-bank buying, retail interest in China, and a resurgence in bets that lower US interest rates are on the way, silver's gone along for the ride. Although there's been scant interest from investors in silver-backed exchange-traded funds, physical sales have picked up, including at Singapore-based dealer Silver Bullion Pte.
"Even clients who are interested in buying gold are starting to say, 'well, maybe I'll buy silver first and wait for the ratio to sort of rebalance,'" said founder Gregor Gregersen. Between April 1 and 25, the outlet sold 74 ounces of physical silver for each ounce of gold, compared with an average of 44 in 2023.
Spot silver traded above $29 an ounce on Friday, heading for a weekly gain of almost 5%. The next significant test would be a challenge of $30, a level that it briefly surpassed in 2021. Should the metal top $30.1003 an ounce, that would lift prices to the highest in more than a decade.
The Dual Nature of Silver: Financial Asset and Industrial Powerhouse
The white metal has already been making headway against its dearer cousin in relative terms. Back in January, the gold-silver ratio was above 90, the most stretched since September 2022. Citigroup Inc. reckons that if the Federal Reserve proceeds with interest-rate cuts and economic growth stays strong in the second half, the ratio could move to around 70, although it cautioned that a slowdown would push it the other way, according to a note.
Silver has a dual character, valued both for its uses as a financial asset and an industrial input, including clean-energy technologies. The metal is a key ingredient in solar panels, and with robust growth in that industry, usage of the metal is expected to reach a record this year, according to the Silver Institute. Against that backdrop, the market is headed for a fourth year in deficit, with this year's shortage seen as the second biggest on record.
That's led industrial users—who typically rely on miners for supply—to seek ounces by draining the world's major inventories, according to Silver Bullion's Gregersen. Stockpiles tracked by the London Bullion Market Association fell to the second-lowest level on record in April, while the volumes at exchanges in New York and Shanghai are near seasonal lows.
According to TD Securities, the LBMA stockpiles may be depleted over the next two years, given the current pace of demand. Daniel Ghali, a commodity strategist, said in an April note that the headline figure overstates the available volume of metal given that it includes exchange-traded fund holdings.
"We are slowly going to see supplies tightening because industrial demand is set to go higher," Gregersen said. "If investors are also starting to buy, then I think in two or three months' time, my biggest problem might end up being 'Where do I find supply?' rather than 'How do I sell the silver?'"
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As a valued reader, we are offering a complimentary portfolio evaluation to discuss how owning silver fits into your portfolio allocation. This consultation will provide insights into how you can potentially enhance your portfolio's resilience and diversification in the face of economic uncertainty.
By considering the incorporation of silver, you may be able to fortify your investments and better navigate the complexities of the current financial landscape. With its dual nature as a financial asset and an industrial powerhouse, silver presents a unique opportunity to capitalize on its potential for growth and diversification.
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