AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
Based on historical experience, whenever the price ratio of gold to silver (gold-silver ratio) is significantly higher than about 70-75 points, it means that a bottom in the price of silver has occurred. Since 1968, the price ratio of London spot gold and silver has fluctuated between 15 and 100, with an average of about 55 points.
During Wednesday’s (31 July) trading session, futures gold prices managed to rally above $2,400 per ounce, while silver continued to test resistance near $29 per ounce. Gold’s recent outperformance pushed the gold-silver ratio to a two-month high of 86.79 points at one point. Now, the gold-silver ratio has stabilized around 84.3 as momentum in the silver market begins to shift.
Bank of America commodities analyst Michael Widmer noted in a report released Wednesday that silver appears to have stronger fundamental support, despite greater volatility due to the smaller size of the market. The bank currently sees silver prices averaging about $28 an ounce this year, with a significant jump to $34.50 an ounce expected by 2025. By then, the gold-silver ratio will have fallen back to a relatively healthy level of 75 points.
Widmer explains in the report that he sees the silver ratio dropping another 10 points by the end of this year. Silver will outperform gold as the global economy drives industrial demand for the white metal. While a weaker dollar and falling interest rates are supportive of both precious metals, a re-acceleration in industrial production next year should help silver outperform gold.
He added that growing demand for green energy will drive industrial consumption of silver as the economy grows steadily. Silver consumption in China has grown due to increased solar capacity, and Chinese smelters are facing a global mine supply crunch.
The China Photovoltaic Industry Association (CPIA) estimates that China’s solar photovoltaic industry consumed 220 million ounces of silver last year, or 18 per cent of total global silver demand, and is expected to continue to grow at a solid pace this year.
Among other countries, the U.S. and Japan have increased their purchases of silver from abroad. Analysts believe that the supply of silver from mines cannot keep up with consumption at a time when demand is growing, which is the root of the silver bull market.
Analysts say silver prices have been range-bound between 2020 and the first quarter of 2024, averaging around $23.50 per ounce, which has been heavily influenced by healthy inventories, but the silver market will get tighter in the future, and the days of $20 silver prices may be gone.
