Gold has reached new highs this year and deserves attention. But so does silver, its sister metal, which has done better than gold so far this year and may be getting ready for a big rally that will send prices to all-time highs.
“Investors and consumers who were interested in gold are now also interested in silver,” said Michael Cuggino, head and portfolio manager of the Permanent Portfolio Family of Funds. He said that the situation is bullish for both metals because interest rates are going down, there is uncertainty around the world, and the U.S. dollar is getting weaker. However, silver likely “has more aggressive price action at this time.”
Futures on gold for delivery in December GC00 0.31 GCZ24 0.31% hit a new record high of $2,617.40 an ounce on Comex on Monday. This came after setting a new all-time high of $2,610.70 on Friday, which was their 34th record-high closing of the year. Dow Jones Market Data says that as of Monday, gold prices were 25.9% higher year-to-date.
The December contract for silver SI00 0.33% SIZ24 0.31% ended on Monday at $31.14 an ounce. This is a long way from the record-high settlement price of almost $50 an ounce in 2011. Still, prices have gone up an impressive 29.3% year to date based on the most current contract.
There has been a lot of talk about gold this year, but Hamad Hussain, a junior climate and commodities economist at Capital Economics, wrote in a note late last week that silver had done better. “Lower Treasury yields and a weaker dollar, two factors that have helped the price of gold, have also helped the price of silver in recent months.”
Silver, like gold, has also benefited from a spike in demand from China, he said.
There was demand from investors and consumers, but industrial demand also played a big role in pushing prices up, Hussain said. “Silver’s use in the production of solar panels has grown quickly in China.”
He said that in 2023, electricity generated by solar panels made up about 15% of all silver consumption. Light energy is turned into power by a photovoltaic cell.
The World Silver Survey 2024 from the Silver Institute and Metals Focus says that there were 184.3 million ounces of silver that were not available on the world market. The study said that the deficit was one of the biggest ever, but it was 30% less than last year’s “likely all-time high.”
“Silver prices are likely to rise, too,” Hussain said, because silver prices tend to move in sync with gold prices and Capital Economics thinks that gold prices will be higher by the end of next year.
Still, he said that silver prices might not be able to go up much in the future because of weak industry demand. China’s growth is expected to slow down next year, which will make the prices of industrial metals like silver go down, he said.
China’s solar industry group wants the industry to become more consolidated because solar manufacturers are having a hard time with money. This could slow the growth of silver demand from the solar sector in the short term, Hussain said.
Capital Economics, on the other hand, says that silver prices “are not likely to rise as strongly as the 10% increase we expect in gold prices between now and the end of 2025.”
Cuggino of the Permanent Portfolio Family of Funds, on the other hand, said that he thinks silver will continue to do better than gold because its price has “yet to break out like gold has.”
He said that silver is in the middle of a big rise. He said that we are “already seeing” the things that would need to happen in the market for prices to reach record highs when asked what would need to happen.
Most-used silver futures haven’t been above their all-time highs in over 13 years. On April 25, 2011, they went as high as $49.82.
“The current state of the economy and the fact that supply is not keeping up with demand for silver give it a very solid base of support in the high $20s per ounce. There is a good chance that the price will break out and stay in the $30 per ounce range for the next couple of years,” Cuggino said.
The state of the economy is another thing to think about. Silver does pretty well during recessions, he said. “A recession would hurt industrial demand, but it probably wouldn’t have a big effect on prices because silver’s value is low compared to real interest rates that are going down because the Federal Reserve is cutting short-term rates.”
Wednesday, the U.S. central bank is likely to announce a drop in interest rates. This could be the first of many drops that will help the economy and protect it from going into a slump.
Silver traders might want to wait for a drop to around $20 an ounce, but long-term investors should feel comfortable with the prices because the metal is likely to do better in the long run, Cuggino said.
