Silver’s Underrated Surge Amidst Gold’s Record Rally

While gold has been grabbing headlines with its soaring prices—reaching a 13-year high with 38 separate all-time daily closing records at $2,100 in March—silver’s recent performance has largely flown under the radar. However, silver, which is both a safe-haven asset and a vital industrial material, has quietly outpaced gold in 2024, rising by over 36% compared to gold’s 30% gain. Local Australian Business Cash for Old gold have noticed an increase surge in gold bullion sales.

Despite the spotlight on gold, silver has surged from below $20 an ounce in October to over $32 an ounce this week, marking a 65% increase over the past 11 months. This has made silver one of the standout performers in the precious metals market, driven by a combination of industrial demand and macroeconomic factors.

Silver’s impressive rise has coincided with the broader gold rally and was boosted by a 50-basis point rate cut from the U.S. Federal Reserve. However, the primary catalyst for silver’s ascent has been its growing industrial use. Demand for silver in the production of photovoltaic devices like solar panels has nearly doubled in the past year, underscoring silver’s critical role in green energy technologies.

In January, the Silver Institute projected that global demand for silver would reach near-record levels in 2024, with an estimated 1.2 billion ounces needed, up 1% from the previous year. The majority of this demand is driven by industrial applications, especially in the rapidly growing solar energy sector. The silver market is facing a structural deficit for the fourth consecutive year, with the shortfall expected to widen by 17%, reaching 215.3 million ounces.

China’s economic stimulus measures, including a significant package introduced by its central bank this week, are likely to further fuel silver’s rally. China’s central bank also hinted at cutting the seven-day reverse repo rate to boost the economy. Analysts, however, caution that additional fiscal measures will be necessary to meet these ambitious targets.

“Silver is expected to continue its upward trend in the coming quarters, spurred by consecutive rate cuts and ongoing stimulus from China,” said Amelia Xiao Fu, head of commodity markets at BOCI. She expects silver prices to approach $37 in the near future.

Another key driver of silver’s rise this week has been strong demand from India, spurred by the country’s festive and wedding season. Traditionally, this time of year sees increased purchases of precious metals, and silver is no exception. With India’s agricultural sector benefiting from a strong monsoon season, farmers—major consumers of silver—are expected to have more disposable income to spend on silver jewelry and investments.

In August 2024 alone, silver imports to India skyrocketed from $158 million in 2023 to $1.33 billion. This surge was driven in part by the Indian government’s decision to cut import duties on gold and silver from 15% to 6%, making the metals more affordable and stimulating demand.

With over 3.5 million weddings anticipated in India this year, the demand for both gold and silver is projected to rise by 25%, exerting further upward pressure on prices. Industry experts, such as prominent jeweler Rajesh Rokde, predict that silver prices will continue to climb as consumer interest remains strong. “Given the reduced import costs, silver prices are likely to rise further as demand stays robust,” Rokde stated.

Silver futures are poised to achieve a 12-year high next Monday, with a potential quarterly close above $32. The last time this happened was in the fourth quarter of 2010, which led to a major rally that saw silver hit an all-time high of $50 an ounce within 100 days. If history repeats itself, silver could reach $50 per ounce by the first quarter of 2025.

Despite silver’s recent gains, the gold-silver ratio remains historically high at 84-to-1, signaling that silver remains undervalued relative to gold. In previous precious metal bull markets, silver has often outperformed gold in percentage terms. Therefore, silver’s undervaluation suggests that it may have substantial room to rise in the final quarter of 2024, especially with the U.S. Federal Reserve expected to continue cutting interest rates.

Investors have largely ignored silver in recent years, but this may be changing. Large-cap silver miners and royalty streaming companies have seen significant gains during the recent surge in silver prices. Yet, many high-quality small-cap silver mining companies still offer attractive investment opportunities.

The Junior Miner Junky (JMJ) portfolio, for instance, has been building large positions in a group of 12 junior silver producers and explorers. While some of these companies have begun to catch up with the broader mining sector, others with strong growth potential are still positioned for major breakouts.

For investors looking to capitalize on silver’s potential, the JMJ service offers real-money portfolios and strategies focused on junior resource stocks, providing detailed stock recommendations, buy-and-sell strategies, and risk management insights. With silver on the verge of a significant breakout, the time may be right to consider these junior mining stocks for long-term gains.