Silver has outperformed gold in 2024 and is on track for a 4th straight yearly supply deficit

Wed April 17 2024

Silver has been outpacing gold’s gain so far this year, and an annual report from the Silver Institute predicts that the global market for the metal is poised to mark a fourth straight yearly supply deficit.

The deficit would be driven in part by a rise in global industrial demand for silver to a fresh record high this year, according to the Silver Institute’s World Silver Survey, which is produced by researchers at Metals Focus and was released on Wednesday.

Silver demand for industrial applications rose by 11% to an all-time high of 654.4 million ounces in 2023, the survey said. That was supported by rising demand from “green economy applications,” including the solar industry, which uses the metal in photovoltaics, or the conversion of light into electricity.

Global industrial demand for silver climbed while investment demand for the metal fell in 2023.

Silver Institute’s World Silver Survey 2024, Metals Focus

Overall global demand for silver “massively exceeded” supply last year, with that deficit expected to extend into a fourth consecutive year in 2024, the survey said.

Data show an estimated silver-market deficit of 184.3 million ounces for 2023. That’s the second highest on record, with 2022’s deficit of 263.5 million ounces marking a record high, it said.

Silver outpaces gold’s rise

Stronger price gains in silver might have been expected against this increasingly supportive backdrop, especially given a sharp rise in gold prices since the start of the year to a series of all-time highs, the survey said.

Gold futures GC00, 0.24% GCM24, 0.24% marked their 19th record-high close for a most-active contract so far this year on Tuesday, when they settled at $2,407.80 an ounce on Comex, according to Dow Jones Market Data. In contrast, silver futures SI00, 0.58% SIK24, 0.58% settled Monday at $28.717 an ounce, the highest since February 2021, following 13 consecutive session gains.

Still, silver has managed to outpace gold’s rise year to date, with silver up 17.9% and gold up 15.3%.

Global industrial demand for silver climbed while investment demand for the metal fell in 2023.

Silver Institute’s World Silver Survey 2024, Metals Focus

Overall global demand for silver “massively exceeded” supply last year, with that deficit expected to extend into a fourth consecutive year in 2024, the survey said.

Data show an estimated silver-market deficit of 184.3 million ounces for 2023. That’s the second highest on record, with 2022’s deficit of 263.5 million ounces marking a record high, it said.

Silver outpaces gold’s rise

Gold futures GC00, 0.23% GCM24, 0.23% marked their 19th record-high close for a most-active contract so far this year on Tuesday, when they settled at $2,407.80 an ounce on Comex, according to Dow Jones Market Data. In contrast, silver futures SI00, 0.58% SIK24, 0.58% settled Monday at $28.717 an ounce, the highest since February 2021, following 13 consecutive session gains.

Still, silver has managed to outpace gold’s rise year to date, with silver up 17.9% and gold up 15.3%.

The “traditional view is that silver will outperform gold in a bull market, but so far this has been muted,” the Silver Institute’s survey said, adding that silver prices have met with strong resistance near $25 since 2023.

It pointed out that gold has benefited from “broad safe-haven buying and reserve/portfolio diversification among central banks and investors with a longer-term horizon” — something silver has “not enjoyed to anywhere near the same extent.”

The survey also highlighted the fallout from China’s real-estate crisis and its impact on the local economy in the longer term and said that has weighed on the demand outlook and prices for base metals such as silver.

Supply deficit and investor interest

Last year’s global silver supply deficit actually fell 30% from the year before, on the heels of a 28% decline in physical investment to a three-year low.

That included an annual drop in silver bar and coin sales for the first time since 2018.

The silver supply deficit, however, is expected to grow by 17% this year to 215.3 million ounces, with industrial demand forecast to climb by 9% this year to a new record high, the Silver Institute’s survey said.

Investor interest in silver has improved in the first quarter of this year, partly reflecting optimism that the start of a rate-cutting cycle is in sight, which had been reaffirmed by the U.S. Federal Reserve after the central bank’s March meeting, it said.

Assuming inflation continues to ease, the Silver Institute said it expects that the Fed will make three 25-basis-point policy-rate cuts this year, with the first one likely to occur mid-year, and that the central bank will signal a generally dovish outlook for 2025.

The subsequent fall in yields, especially in real terms, should favor investment in precious metals into the second half of this year, it said.

Also, even with the recent retreat, a still high gold-to-silver ratio will “attract some investors who view silver as undervalued over the long term, perhaps also as its strong fundamentals gain attention,” it said. As of Wednesday, it would take about 84 ounces of silver to buy one ounce of gold.

However, the extent of silver’s recovery “may be restrained by a weak Chinese property sector,” the report said.

Source: https://www.marketwatch.com/