Silver enjoys 'stealth bull run' as gold grabs headlines
While the price of gold has made plenty of headlines in recent months, silver's progress has gone under the radar, and sector experts suggested it may do better than the more illustrious yellow metal. Silver hit a dollar high of $34.5 per troy ounce in November, and after retreating has climbed back up above $33.3 an ounce today.
Silver has enjoyed a "stealth bull market", according to Adrian Ash, director of research at metals marketplace BullionVault, as supply of the metal has lagged demand for seven years running. Experts at Sharps Pixley, in their monthly report, said silver is "well placed to outperform gold, especially if industrial production starts to increase, which it may do as China stimulates its economy and Europe boosts military spending".
They noted that the gold/silver ratio – referring to the amount of silver required to purchase one ounce of gold – is currently high, at 1:90, with a drop in the ratio favouring silver. Silver's highs have come "under the radar for two reasons," said Ash. "First, that silver has set fresh records outside the US dollar, leaving headline writers to miss its new highs in terms of other currencies including the pound.
"Second, and rather than shooting the lights out like gold has over the past 12 months, the price of silver has risen to new annual and month-average records without hitting fresh daily highs." On an annual average basis, silver priced in the GBP rose 17.6% in 2024 to set a new all-time high of Ł22.10 per ounce, with the underlying uptrend rising again to an average above Ł25 per ounce since the start of January, he says.
"Silver in 2025 is set to show a deficit of new supply versus demand for the seventh year in a row.
"That gap is being driven by record industrial and technological uses, which account for almost 60% of silver's annual demand, running from electrics and electronics to brazing alloys, the defence sector, the chemicals industry and solar energy. That contrasts with less than 10% productive use for gold."
Silver rising by a third in the past twelve months has been good news for miners like FTSE 100-listed Fresnillo and mid-cap peer Hochschild Mining PLC.
Results from the miner earlier this week showed a big jump in profits and a huge increase in its dividend.
"Equity investors clearly do not share commodity traders’ enthusiasm for precious metals and their producers," said AJ Bell investment director Russ Mould, as Fresnillo’s shares are less than half their level of 2013 when silver last traded above $30 an ounce.
"Sceptics will counter by arguing that the precious metal had peaked two years earlier, in 2011, and was firmly on a downtrend. Bulls will assert that the trend in silver looks much more encouraging, at least for now."
Mould said 'silver surfers' might assert that silver is cheap relative to gold, with the gold/silver ratio is nearly 92 times, whereas the post-1971 average is just 61 times.
"If silver does put on further gains, then Fresnillo should benefit, since it is the world’s largest silver miner, although extracting precious metals from a mine is never as simple as it sounds," he said, noting that changes to Mexico’s mining laws are one complication, given reduced lifetimes for concessions, permits that focus on specific minerals and not just whole areas and stricter environmental requirements.
All eight of Fresnillo’s operating silver and gold mines are based in Mexico, as are its four advanced exploration projects, so the company's shares also may reflect the tariff to-and-fro with the USA.
Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF), based in Peru operates silver and gold mines in North, Central, and South America.
Its shares have fared better, up 15% in the past month, but flat so far this year.
Source: https://www.proactiveinvestors.co.uk/