Gold and silver prices continue to rally strongly. While gold still attracts significant market attention, silver may now deserve more focus. Driven by strengthened expectations of a Federal Reserve rate cut, spot silver broke through the $40 per ounce mark on Monday, hitting its highest level since 2011 and injecting new momentum into the multi-year bull run in precious metals.
Spot silver rose more than 2% last week. Extending Friday’s strong gains, silver surged 2.7% to $40.72 per ounce in early Monday trading, a high not seen since September 2011. Gold also advanced by 1.2%, approaching the record high of $3,500 per ounce set in April.
Charu Chanana, strategist at Saxo Capital Markets, stated that key resistance levels around $3,450 for gold and $40 for silver had been breached, triggering momentum buying. Analysts Amy Gower and Martijn Rats from Morgan Stanley noted that Fed rate cuts, a weakening US dollar, increased ETF inflows, and improved Indian imports would support both gold and silver prices. They expect gold to have around 10% further upside, and although silver is already close to their target price, there is still potential for it to overshoot.
A major historical disadvantage for silver has been its lack of institutional interest. When funds seek safe-haven assets, they typically turn to gold, which is preferred by central banks. At the same time, the silver market is only about half the size of gold’s, making its prices far more volatile. Investment demand has mainly come from retail investors who cannot afford high-priced gold.
Therefore, recognition from sovereign wealth funds could be a key turning point for the silver market.
While Harvard University’s endowment fund significantly increasing its position in the world’s largest gold ETF, SPDR Gold Shares (NYSE: GLD), changed gold’s demand dynamics, another important precious metals investment occurred in the second quarter: the Saudi Central Bank invested $30.5 million in the silver fund iShares Silver Trust (NYSE: SLV) and nearly $10 million in the silver miners ETF Global X Silver Miners ETF (NYSE: SIL).
Although Saudi Arabia’s investment in silver is much smaller than its allocations in the tech sector, a growing number of analysts emphasize that this demonstrates silver’s investment value independent of industrial growth trends. Silver’s core appeal lies in its relative valuation: although the gold-to-silver ratio has significantly declined from its peak above 104 in April, it remains high at 86, still well above the historical average of 50-60.
