Gold does not stop breaking all-time highs. The yellow metal is experiencing a loop of rises in which it does not stop winning. Geopolitical uncertainty, elections, central bank demand, lower interest rates, resilient inflation, bonds falling…Everything conspires in favor of the active refuge par excellence. However, although all eyes are on gold, one movement has gone much more unnoticed. Its little sister, silver, has seen a stronger rally in recent months and, in particular, in recent weeks. All this without central banks buying wildly to get away from the dollar in their reserves and without the popularity of gold as a defensive asset par excellence.
While gold is in a really sweet spot, up 9% since September that It has earned him $2,750 per ounce. Silver has more than doubled these gains with increases of 20% in that same period. So far this year the difference has blurred somewhat more but the younger brother also prevails with advances of 44.5% compared to almost 33% for the yellow metal.
As with gold, silver typically moves as a safe haven asset in which Investors protect themselves in more difficult times. In that sense, there is a choice. Firstly, an election in the US where the race between Kamala Harris and Donald Trump for the White House is very tight (and which can have great consequences for the world economy, for example, due to the tariff increases proposed by Trump). Then there are the always incessant conflicts in the Middle East, with Israel and Iran raising the tension and an escalation in China’s diplomatic conflict over the East Sea, in which its coast guard ships are having confrontations with those of countries like the Philippines or Vietnam, but There are also clashes of statements with Malaysia, Thailand, Singapore or Taiwan.
However, while the refuge factor is the key element to understand gold and the voracity of central banks as an extra element, in silver there are other factors that are on the table and that They are setting prices on fire. Because silver has many more applications in industrial segments and various sectors, Morgan Stanley explains that there is a big difference with gold that explains why it is now far beating the yellow metal. While gold is the king of geopolitical havens, silver “responds with great intensity to the outlook for the global economy.”
“Half of all the silver produced is used for heavy industry, high technology, smartphones, automobiles…”. Apart from these sectors, there is also a great demand in the renewable sectors and the ecological transition, It is required for both solar panels and cells, in addition to being a key component in the manufacture of batteries. comments the firm in its latest report. “From electrical switches and solar panels to chemical-producing catalysts, silver is an essential component in many industries. Its unique properties make it almost impossible to replace, and its uses span a wide range of applications,” comments the Institute of Silver. the Silver. Gold, for its part, is exposed to the luxury sector, but, apart from the ounces that can be used for jewelry, there are few other applications for the raw material beyond its store of value.
A global turn in the economy
This is why silver has reacted with joy to a change in outlook for the world economy, which has gone from pointing to an accelerated slowdown, even with a possible recession in the US, to a context of greater resistance. In the latest update from the IMF, it comments that “global growth is expected to remain stable”, specifically at 3.2% for 2024 and 2025. Although it is not a very high figure, the IMF highlights that it represents a clear comeback thanks to ” overt reviews such as upward corrections in the US”, for which they project 2.8% of growth.
Although in countries like Germany or France the industrial sector is dragging down their economies, with Germany pointing to a recession of 0.2% (according to the same Bundesbank) and increases of only 0.2% for the second, according to the Bank of France , the European Commission hopes a growth of 1% for the entire region. In any case, the pessimism of some advanced economies is offset by the good prospects of the US and Asia.
Aside from the economy in general, silver is sensitive to sectors that are ‘on fire’. From semiconductors like other areas of technology, like smartphones. It is also exposed to areas that are currently weakened, such as the automotive industry and renewables, in addition to the applications it has for heavy industry in general. A segment that is threatened by a restrictive monastery context.
“We expect silver prices to reach a range of $50-70 (compared to the current $34)”
From Jupiter AM they explain that “silver benefits from two demand drivers. In addition to act as a safe haven asset during phases of economic instability, Silver is important for sectors in the growth phase, such as clean energy and electronics. “This strong industrial demand creates a dynamic floor in the price of silver that reinforces its long-term attractiveness.”
The firm believes that it also has the fuel to continue outperforming its peers. believe that silver will continue to grow rapidly “We expect silver prices to reach a range of 50-70 dollars (compared to the current 34 dollars)“Once the critical level of $32.50 is broken,” he indicates, “a trading threshold that could trigger a powerful upward movement.” The “silver pull” is “the catalyst we have been waiting for.”
A market in deficit
This is mixed with a deficit situation in the market. According to the Instituto de la Plata, last year the demand reached a record by rising 12% to 20,353 tons“. The institution explained that “industrial applications continued to increase last year, something that has contributed to deficit conditions in the market.”
The institution published its updated forecasts for 2024 this month, claiming that the deficit will widen to 17% because it believes that demand will continue to grow by 2% despite last year’s record. “We see solid industrial consumption and solid orders from sectors that have been suffering, such as solar.” In that sense, while this occurs on the demand side, production falls by 1%.
From CPM Group they comment that silver mining has been in a firm decline for years that ensures supply problems “There has been a decrease in heat in key projectslack of new discoveries and very few new mines coming into operation.
“Increasing production costs have further limited silver supply. Despite higher prices, operating costs in many cases have outpaced growth”
Even if there is growth, Metal Focus comments that it will always “it will be modest due to the nature of the market“. The firm indicates that “only 28% of the silver supply comes from primary silver mines, the rest comes from secondary copper, lead or zinc mines, consequently it is unlikely that even significant increases in the price of silver influence more production plans.
However, the silver mines themselves are experiencing problems due to inflation. To begin with, the aforementioned “decrease in mineral qualities” has been mixed with a “rapid increase in extraction costs” due to the CPI and the worsening of prospecting. Regarding the first, Metal Focus calculations indicate that the qualities of the mineral have fallen 22% in operational mines where is the primary material. “Increasing production costs have further limited the supply of silver. Despite higher prices, operating costs in many cases have outpaced revenue growth, leading to little or no improvement in operating cash flow for silver-focused mining companies.
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