Gold Prices Keep Rising,When Will Silver Finally Catch Up?

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Published on: Mar 26, 2024
Author: Caroline Kong

After the Federal Reserve signalled that it could cut interest rates three times this year and gold prices hit a record high of more than $2,200 an ounce, some investors are worried that the precious metal will retreat in the short term. And at the same time, gold’s sister metal, silver, is attracting interest from hedge funds.

As this surge in gold pushes the gold/silver ratio above 89 points, the latest trading data from the U.S. Commodity Futures Trading Commission (CFTC) shows that silver’s momentum remains strong as gold’s bullish momentum shows weakness. For the week ending 19 March, the net long position in the silver market has increased for three consecutive weeks, totalling 37,122 contracts, the highest level since April 2022.

This shows that there is still a chance that the $25 per ounce resistance level currently being tested by the silver price could be breached. In fact, while the price of gold is hitting record highs, more and more investors are beginning to discuss when the price of silver will be able to catch up with this gold bull market.

John LaForge, head of real assets at Wells Fargo, said in a recent interview with Kitco News that while silver has traditionally always been a few steps behind, it can easily outperform gold once it finds upward momentum. Investors usually need to confirm the trend in gold before they dabble in silver. Silver may rally slowly, but it will soon become an asset worth owning.

Currently, much of the investor concern about silver comes from uncertainty about the outlook for industrial demand. However, some analysts point out that silver may not be affected by a recession because, as a key metal in the green energy transition, silver is a major component in the production of solar panels. If the global economy does fall into recession, the green energy sector remains an attractive target for government spending.

Meanwhile, silver supply continues to dwindle. Nicky Shiels, head of metals strategy at MKS PAMP, pointed out that silver production in the world’s top two silver-producing countries, Mexico and Peru, has fallen to its lowest level in 14 years. Data shows that total production in Mexico and Peru has decreased by 25 per cent compared to 2016, which has helped to drive a reduction in ground stocks as a substitute.

As for when silver prices could rise to the occasion, Shiels believes she expects investment demand to pick up as central banks begin to cut interest rates. The Federal Reserve could start its easing cycle by cutting rates in June. Geopolitical uncertainty ahead of the U.S. election could also generate some safe-haven demand for silver, she added.

Peter Spina, GoldSeek’s president and CEO, said silver prices could be poised for an explosive move given that global supply continues to fall short of demand and the Fed is poised to make good on its plans to move to rate cuts in the coming months. “The window to buy silver at around $20 is closing,” he noted.

If you’re interested in investing in silver, you might want to keep an eye on this company: Silver Storm Mining Ltd. (TSXV:SVRS). Silver Storm Mining Ltd. holds advanced-stage silver projects located in Durango, Mexico. Golden Tag recently completed the acquisition of 100% of the La Parrilla Silver Mine Complex, a prolific operation which is comprised of a 2,000 tpd mill as well as five underground mines and an open pit that collectively produced 34.3 million silver-equivalent ounces between 2005 and 2019. The Company also holds a 100% interest in the San Diego Project, which is among the largest undeveloped silver assets in Mexico.

Disclaimer: Investing involves risk, and individuals should conduct thorough research and seek professional advice before making financial decisions. NAI is being compensated for this content. Materials contained in this content are for information purposes only and is not intended to constitute an offering of securities in any jurisdiction. Nothing on this content should be construed as an offer, solicitation or recommendation to buy or sell products or securities.

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