Russell: Silver outperforms Gold for the precious metal podium
Silver is often referred to as the bridesmaid of gold on precious metal markets. Its more popular rival seems to overshadow its less talked about counterpart.
Silver is outperforming gold quietly in terms of returns for investors. It may also have a better long-term outlook, given the structural deficit in supply and the surge in demand from renewable technologies like solar panels.
Since October 2023, spot silver has been on a steady upward trend. Its price jumped 163% between a low of just $20.67 per ounce in October of that year and a record high $54.38 on November 13, an increase of 163%.
Since then, it has retreated by 5.6% and closed at $51.33 per ounce on Wednesday.
Spot gold rose 142%, from a low price of $1,813.90 per ounce in October 2023, to a high of $4,381.21 an ounce on the October 20, before falling 5.0%, to close at $4163.51 Wednesday.
Silver has not outperformed the gold in terms of price, but its gains are more impressive because it isn't receiving the media attention that the more glamorous precious metal receives.
Silver has also shown a higher rate of return than gold. Between October 2008 and a record high of $48,24 per ounce in April 2011, silver's percentage gain was 431%.
Gold's gains over this period were also modest, but still 168%.
When gold rallies, the media tends focus on it more due to its history as a storehouse of value as well as its appeal as jewelry.
The current trend was accelerated by the return of Donald Trump as U.S. president, which led to expectations of monetary policies being eased, but also a potential loss of trust in U.S. assets, such as Treasuries, as his administration sought more control over the Federal Reserve.
Gold's rise was boosted by central bank purchases and investor interest in gold bars, coins and exchange-traded gold funds.
Silver rides on the coattails of gold to some extent, but because it is less valuable, it's more expensive to store silver in its physical form, which limits its appeal as an investment.
SOLAR SURGE
Silver's bullish prospects are bolstered by the increasing industrial demand for the metal and its limited potential to increase mined production.
LSEG data shows that industrial demand will increase to 689.1 millions ounces by 2024, up from 644.9 million ounces the previous year.
Solar panels accounted for 243.7 million of these ounces, an increase from 191.8 millions the previous year, and a 158% increase from 94.4 million in 2019.
The addition of solar power capacity in the world was about 600 gigawatts by 2024 and is expected to reach close to 1,000 GW before 2030.
International Energy Agency estimates that 4,000 GW new solar capacity is expected to be installed between 2024 and 2030.
The solar demand alone will increase silver demand by about 150 million ounces per year by 2030. This would be an additional 13% over the physical demand in 2024 of 1,169 billion ounces.
Silver demand will likely be affected by the higher price of jewellery and other silver-related products.
LSEG calculated that the market deficit in 2024 would be 501.4 million ounces, a sharp increase from 19.4 millions in 2023.
Silver is mainly produced as a waste product from other metals such as lead, copper, zinc, and gold.
The supply of silver is largely determined by the economics of supply and demand for these metals rather than its fundamental outlook.
The silver supply is likely to increase in the coming years, given the positive sentiment toward copper and gold. However, expanding production from existing mines and developing new projects are lengthy processes that may take time to materialise.
An article published on the industry website Mining Technology in July predicted that global silver production would drop to 901 millions ounces by 3030 from 944 million expected this year.
You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X.
These are the views of a columnist who writes for.
(source: Reuters)
