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2024/07
Rising silver prices: A comprehensive analysis of market trends in 2024
In 2024, international gold prices have increased, frequently reaching new historical highs. This trend has led some investors who missed the gold rally to turn their attention to relatively cheaper silver, resulting in a significant surge in silver prices that has even outperformed gold.
One key reason for silver’s impressive performance is its smaller market size than gold, making it more susceptible to speculative price swings. WisunoFx’s analysis indicates that various fundamental factors suggest a strong potential for further increases in silver prices.
Since the beginning of 2024, precious metals and raw materials have experienced substantial gains. While gold has consistently broken new highs, there are better-performing metals this year.
Silver has taken that spot. As of June 6, the New York Commodity Exchange (COMEX) August gold futures were around $2385 per ounce, up 12% for the year. In contrast, COMEX July silver futures were around $30.4 per ounce, up 24%, reaching a new high in over a decade.
Silver Demand: Three Major Pillars
As of June 28, silver prices stood at $29.14 per ounce, while gold was at $2325 per ounce, resulting in a gold-to-silver ratio of approximately 1:79.8. Historically, this ratio has been around 1:10, indicating a significant market deviation.
According to Oxford Economics, the demand for silver is divided into three major pillars: industrial, jewellery, and silverware. Over the next decade, industrial demand is expected to dominate the market by 46%, with jewellery and silverware demand projected to grow by 34% and 30%, respectively. Total silver demand is forecasted to increase by 42% by 2033, benefiting from this demand growth in the long term.
Shift to Silver in India
Traditionally known for its love of gold jewellery, India has significantly shifted towards silver this year. In the first quarter of 2024 alone, India imported about 4000 tons of silver, surpassing the total imports of 3625 tons for the entire year of 2023.
Most of this demand is driven by jewellery, with the Silver Institute reporting that India’s silver demand for jewellery reached 2603 tons in 2023, accounting for over 40% of the global total.
The Silver Institute anticipates India’s enthusiasm for silver will continue, driven by strong economic growth and increasing disposable incomes. China’s economic recovery is also expected to boost silver prices, with industrial applications accounting for over 60% of total silver demand. Oxford Economics predicts China will lead in the silver market over the next decade.
Industrial Use and Silver's Performance Over Gold
Often referred to as “poor man’s gold,” silver prices positively correlate with gold. Randy Smallwood, CEO of Wheaton Precious Metals, notes that silver typically lags behind gold but quickly catches up.
Silver’s extensive use in industrial applications makes it more sensitive to economic changes and volatile than gold. Silver tends to outperform gold during periods of substantial economic expansion, while it underperforms during downturns. Analysts forecast that silver prices could reach $35 to $50 per ounce this year. WisunoFx highlights that higher gold prices increase interest in silver, with predictions of continued supply shortages putting pressure on physical silver inventories.
Conclusion
While gold remains a significant focus for investors, silver’s potential for further gains, driven by strong industrial demand and increasing interest, positions it as a compelling alternative in the precious metals market. As global economic conditions evolve, both metals offer unique opportunities for investors to diversify their portfolios.
