Silver Surging: Market Conditions Favor Silver's Outperformance
Mon June 24 2024
Silver is having a blockbuster year. And analysts say the precious metal is positioned to continue to be a standout performer in the commodities market. A combination of meager supply, increasing demand, and a weaker dollar - plus the uncertainty of the upcoming elections - could propel silver prices to new heights. This is an opportune moment for investors to consider how adding silver to their portfolios may protect their wealth.
Potential for a Massive Upswing
Gold has skyrocketed in recent years, making headlines and breaking records. Meanwhile, silver has been quietly, but steadfastly, trending upwards. Both precious metals are viewed as safe havens during times of uncertainty. So, when gold rises, silver typically does the same. This is exactly what we’re seeing now. Since May, silver has been selling at its highest prices in 11 years, hovering at around $30 per ounce.1
Analysts agree that silver's remarkable streak is likely to continue throughout 2024. This is, in part, because of the metal's multifaceted demand. Everything from jewelry and silverware to investments and industrial applications underpins its strong performance outlook. Particularly notable: silver's critical role in the rapidly growing solar and electronics sectors, which are driving substantial increases in consumption.
A Severe Scarcity of Silver
An increasing global deficit of available silver will likely drive prices higher. Peter Krauth, author of The Great Silver Bull, emphasizes the severe global silver deficit as a key factor in his bullish forecast. According to Krauth, the current silver deficit is the second highest on record. When combining the deficits of the past three years, the total nearly equals half of the entire silver supply for 2023.2
And things aren't changing. The silver supply deficit is expected to persist well into the future. Mining production continues to decline. According to Bank of America, “We’re not revisiting the 2016 highs mine supply for any number of years going forward.” Plus, recycling of silver, which constitutes only 15% of the overall supply, is projected to grow by just 1%.3
Industrial Demand Soars
Meanwhile, the industrial needs of silver are growing. In particular, rapid demand is seen in the electrical and electronics applications industry. A report by Oxford Economics for the Silver Institute forecasts total industrial demand growth of 42% by 2033. That is twice the growth rate of the past decade. This surge in demand, coupled with stagnant supply, is a likely recipe for higher silver prices.3
Investment Demand Climbs
Investment demand is another critical driver of silver's anticipated price increase. Last year, investment demand reached 163 million ounces. Analysts project this figure to soar to between 282 and 290 million ounces in 2024.3
Investment demand can offset potential declines in industrial demand during economic slowdowns. If the Federal Reserve manages a 'soft landing' for the economy, industrial demand is expected to surge further.3 This is all the more likely given the robust government support for solar and green initiatives.
Presidential Election Season & $50 Silver Spikes
Historically, volatility ramps up during the presidential campaign season. Whether people anticipate a change of leadership or just more of the same, the market tends to react. In both 2016 and in 2020 silver prices surged in July and August. For this contentious election, history just may repeat itself. In fact, some analysts are predicting summertime spikes of $50.4
De-Dollarization and Silver
The movement towards de-dollarization is another factor supporting silver prices. As central banks seek alternative stores of value, silver, along with gold, is becoming increasingly attractive. Krauth points out that silver is the "ultimate anonymous liquid alternative." He highlights that central banks' desire to move away from the dollar will support silver prices. A weaker dollar typically bolsters the value of precious metals, making silver an even more appealing investment.5
UBS analysts are particularly optimistic, stating that silver is set to "really, really shine" as interest rate cuts take effect. Strategist Joni Teves says, “In a scenario where the Fed is easing, we think silver can do really well. It tends to outperform a move in gold.” The bank predicts gold will reach $2,200 and believes silver’s outperformance “could be quite dramatic.”6
The Gold/Silver Ratio
The gold/silver ratio indicates how many ounces of silver are needed to purchase one ounce of gold.
Now, the ratio is 79. This is high. Historically, when this ratio is high, it signals a potential for significant increases in silver prices.
For example, in the early 1990s, the ratio remained above 80 for 39 months, after which silver prices rose by 87% over the next five years. A similar pattern occurred in 2008 and the late 2010s, with silver prices surging following periods of high ratios.7
The ratio has largely hovered at or above 80 since May 2022. Historical data suggests that silver prices could rise from their current level of approximately $29 per ounce to all-time highs.1
Conclusion
The combination of soaring investor and industrial demand, supply shortages, a weakening dollar, and political uncertainty are aligning to create a potentially explosive rise in silver prices. For investors, now is the time to explore how diversifying their precious metals holdings by adding silver or a Gold IRA can protect and potentially enhance their portfolio's value. To learn more about adding silver to your financial strategy, contact American Hartford Gold today.
Source: https://www.newsmax.com/