Is silver finally poised to outperform gold after years playing second fiddle? Precious metals analyst Sanjiv Arole dives into the recent surge in silver prices and the debate around whether it can outperform its precious metal counterpart, gold. He explores the factors driving silver’s rise, predictions for its future, and the potential impact on investors.
Sergei Bubka broke the pole vault world record an amazing 35 times for around 20 years since the early 1980s. He held the world record of 6.14 metres for a number of years and made pole vaulting a glamour sport. In a way, gold too vaulted its way to the top for the first time to a then all-time of $850 per ounce in 1980. Since then, gold has repeatedly scaled fresh highs quite frequently with the latest all-time high being around $2,760 per ounce breeched just a few days ago in the days gone by. In pole vault, the new kid on the block is Armand Duplantis with multiple world records and a high of 6.26 metres and back-to-back Olympic gold medals. For many, silver is the latest craze in town when the white metal soared past $34 per ounce and to briefly touch $34.70 per ounce in the middle of last week. However, gold more than held its own as it ended the week at $2,747-48 per ounce in New York while silver declined to $33.67-77 per ounce region. During the last week, gold even improved the gold:silver ratio from around 80 to 83. Just as Bubka’s legacy remains unchallenged in spite of the Duplantis era, gold has reigned supreme through the times.
Quite suddenly, in the last few days, there have been scores of reports that have promoted, proclaimed and predicted that silver could well cross $50 per ounce in the coming year and even soar onwards to greater highs. Probably, the fact that silver rose by over 42% as compared to gold’s 32% plus from the beginning of 2024 to date influenced many analysts, experts and even laymen. So much so that even delegates at LBMA’s Miami conference voted for silver instead of gold. Kitco.com news reported that according to LBMA’s annual delegate survey in early October, 45% of attendees expected silver to outperform all the other precious metals during the period till next October 2025. Those who rooted for gold were lower at 37%, while platinum supporters were 16% and some 2% were brave enough to sit in palladium’s corner.
Delegates were reportedly conservative while predicting a 10.5% hike in the gold price from the current levels around $2,747 per ounce to around $2,941.40 per ounce by October 2025. On the other hand, the same delegates forecast silver prices to increase by 43% over the current levels of over $31.45 per ounce to $45 per ounce by October 2025. The optimism for silver was fuelled by expectations of increased industrial demand continuing to drive market deficits, while mine supply struggling to keep pace. Some experts did not see any fundamental downside for silver. Ironically, delegates at the same conference in October 2023 had predicted gold at $1,990 per ounce in early October 2024. However, they were way off target by around 37%, as gold crossed $2,700 per ounce in October 2024 with a fresh all-time high of $2,760 per ounce (intra-day). Will the predictions made by delegates of the October 2024 conference be closer to the actual numbers in October 2025 or will they miss the target once again as in previous years?
As mentioned before, there has been a surfeit of reports on how silver’s time has come. Here is a synopsis of these reports:
- Silver demand has outstripped supply for three consecutive years and The Silver Institute projects another deficit for 2024 to the tune of around 215 million ounces, this could be the second largest deficit ever recorded. This is mainly due to a surge in industrial demand in solar panels, energy, green energy, photovoltaic cells, etc among other industrial uses. However, mining output in silver has declined or stagnated since its peak in 2016. No fresh mining is seen as the silver price does not rise in tune with an increase in demand. As silver is mainly a by-product its production costs are much lower and hamper any new mines in silver.
- As mentioned above with demand outstripping supply and no new silver mines on the horizon there is no fundamental downside for silver. With huge silver demand in electronics and other industrial silver usages one has to look at recycling of silver to bridge the supply deficit. However, recovery of silver from electronics industry is far too complicated with poor returns. The low costs of silver mining as it is a by-product makes it very difficult for silver prices to surge only due to fundamentals.
- Russia’s Central bank is all set to acquire silver as part of its reserve strategy for the first time. This marks a notable expansion from the bank’s traditional focus on gold, platinum and palladium, aiming to diversify in the wake of global uncertainties. Russia, the eight-largest silver producer with an output of 38.5 million ounces, appears keen to capitalise on the undervaluation of silver. Will Russia’s move result in other central banks following suit and cause the same impact on the silver price as it happened with the gold price when central banks began to add gold to their reserves? It is too early to say.
- There is speculation amongst technical and even some fundamental analysts who expect silver not only to cross $50 per ounce but scale further to beyond $75 per ounce based on surging demand for silver from various segments of industrial demand as well as from usage of silver new-age technologies as well as growing demand from Asia and the huge supply deficit due to no new source of primary or secondary mines adding to supplies in the foreseeable future. And with mining costs much lower around $10-12 per ounce as much of silver is a by-product, newer mines are hard to come by. As a result, silver miners could dream of windfall profits as silver prices soar higher as anticipated by some. However, will this remain a mere speculation? A dream?
- Even as silver blasted its way through the $33 per ounce barrier and surged ahead to $34.70 per ounce mark briefly there were reports that several major banks faced losses in billions as they held massive short positions in silver. These shorts were said to be equivalent to a year’s production of silver. This in turn could result in downward pressure on the silver price as profit taking could set in. Moreover, the impacted players/banks would try all tricks to mitigate the losses.
- Silver soared through $34 per ounce last week after being restricted to sideways movements on the sidelines for long period and watching gold continue its bull run. Suddenly, there is hope that the hitherto hidden demand for silver could propel the white metal forward towards $50 per ounce for the first time since 2011 and even cross through the $50 per ounce that has held steadfast since 1980. Recent analysis suggest silver’s applications within the secretive realms of military and aerospace technology are not only discussed openly but could far outstrip demand to other industrial usages in electronics, solar panels, energy and even investment demand combined together. With precious metals used in military and space usage not reported, their overall impact on precious metals prices could be hard to gauge.
- Ex Co-/founder of Quantum fund, Jim Rogers reportedly believes that a recession is long overdue in the US. He also predicts that it would be a particularly bad one. He further avers that gold, silver and the rest of the commodities benefit from such a recession. However, he says that he would put his money in silver than gold to tide over the recession. The reason being that silver was much cheaper and still around $16-17 per ounce short off its all-time high price.
However, during recession it is gold that comes to the forefront as a safe haven in times of economic distress. Silver being an industrial metal is likely to be adversely impacted by the slowdown during recession.
Meanwhile, when the economy is booming, silver has an edge over gold due to its dual usage as an industrial metal as well as an ornamental metal used in jewellery and silverware. The white metal is also an investment option and a safe haven as well. However, gold is all that and much more. During times of turmoil, (economic, political, financial, geo-political tensions, wars and even pandemics, etc) gold is in the forefront as a safe haven to tide over the crisis.
Finally, the bottom-line is that gold has been up by nearly a third from the beginning of the year as most underestimated gold’s potential since last year. Significantly, gold’s rally sustained itself even though the US economy was relatively healthy with inflation still high and a resilient labour market. As a speaker at the LBMA conference pointed out that gold seemed to have redefined itself as an asset in diversified portfolios. He added that the yellow metal appears to have become a very effective portfolio diversifier and that Central banks seem to have figured it out and even Western investors appear to have just opened their eyes wide open to this aspect of gold.
Further, silver requires gold to forge ahead and for it to ride in its slipstream, not the other way round!!!