Volatility has picked up in the precious metals market, but one new trend is emerging as the silver market wakes up and starts to outperform gold.
Silver Showing Potential as Gold Consolidates
In a report published Monday, commodity analysts at ANZ said that silver still has significant potential even after hitting solid resistance at $29.90 on Friday. While gold is beginning the week with consolidation after failing to maintain gains above $2,400 an ounce, silver is standing out, currently trading at $28.70 per ounce, up more than 1% on the day. This outperformance is signaling a shift in market dynamics.
Gold/Silver Ratio Narrows
The gold/silver ratio has also dropped sharply to 82 points, its lowest level since early December. This narrowing of the ratio indicates that investors are favoring silver over gold in the current market conditions.
ANZ Analysts Optimistic About Silver
ANZ’s Senior Commodity Strategist, Daniel Hynes, and his team are bullish on silver’s outlook, projecting prices to surpass $31 per ounce by the end of 2024. They anticipate the gold-silver ratio to normalize at 80x by the same time after reaching a high of 91x in February 2024. Hynes and his team believe that factors like easing rate cuts and a weaker dollar will continue to support the upward trajectory of both gold and silver prices.
Tensions in the Middle East have eased following recent events, impacting safe-haven demand for gold. At the same time, improving market sentiment for global economic activity is boosting silver’s industrial demand. Additionally, Hynes points out that silver’s dual role as a monetary metal and an industrial commodity positions it favorably for growth as industrial demands pick up and supply constraints persist.
Silver’s Industrial Potential
ANZ analysts highlighted the positive outlook for silver’s industrial consumption, citing slower mine production growth and strong industrial demand as factors contributing to a structural deficit in the silver market. As the electronic cycle improves and the solar sector shows potential for demand growth, silver’s industrial consumption is expected to rise. The undersupply in the market, coupled with low stocks and a negative market balance, sets the stage for higher silver prices in the coming years.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities, or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/or damages arising from the use of this publication.
Insight:
By highlighting the impact of geopolitical events on safe-haven demand for gold and the role of improving industrial demand in boosting silver’s performance, investors can better understand the shifting dynamics in the precious metals market. Additionally, the expectations for silver to outperform gold based on supply constraints and growing industrial consumption provide valuable insights for strategic investment decisions.
