Silver Set For Banner Year As Investors Bet On Precious Metals

(April 10, 2024 - Emily Jarvie)

Silver crossed $28 per ounce this week and is seen reaching as high as $32 by the end of 2024 amid expectations that interest rates in the US could stay higher for longer.

In part due to safe-haven demand amid geopolitical tensions, the silver price, which is about 40% below its $48 per ounce peak in 2011, has jumped along with gold prices in recent days, with gold hitting an all-time high price of $2,365 per ounce on Tuesday.

“Silver started to move in earnest last autumn, rather like gold, just as financial markets started to wonder whether the US economy was running hotter than expected, with the result that inflation could run higher for longer than expected, a view which gained further currency last week with the strong American non-farm payrolls numbers,” AJ Bell investment director Russ Mould commented.

“Throw in rampant US government spending, and how inflation on the other side of the Atlantic seems to be reaccelerating, and investors and traders may be on the hunt for stores of value once more.”

Mould believes silver may catch the eye of contrarians even more than gold, which is at new all-time highs above $2,300 per ounce.

“The gold price currently trades at nearly 85 times that of silver, whereas the long-term average is a multiple nearer to 65 times,” he said. “That may be enough to persuade some investors and traders that silver is ‘cheap’ relative to gold.”

Analysts at UBS see more upside for silver ahead. They expect silver to reach $32 per ounce by the year-end, noting the metal has surpassed their June forecast of $26.

“We previously argued that the market is underestimating the upside in silver prices given the potential for industrial activity to recover in 2H, amid already buoyant industrial application demand, and prospects of rate cuts,” they wrote.

They believe investors are looking for beneficiary laggards of lower interest rates ahead.

“We see this reflected in the material performance gap between gold and silver. When manufacturing activity increases, the gold-silver ratio can easily reach 70x to 75x (currently at 84.6x). This would imply a silver price of $30 to $32 per ounce,” they wrote.

They concluded: “We recommend investors stay long silver and let momentum run its course. Alternatively, investors can still sell silver’s downside risks for a yield pickup over the next six months.”