has sharply outperformed gold’s gains over the past three months, and its classification as an industrial and precious metal could lead it to even higher prices.
From Oct. 31 to Jan. 31, Comex silver futures rose nearly 25%, outpacing gold’s nearly 19% gain, a “statistically unusual amount that suggests the precious metals market is bullish on global economic growth in 2023.” – wrote Nicholas Kolas. – Founder of DataTrek Research in a January 25 report.
He noted that silver is primarily an industrial metal, while gold is used primarily as an investment and jewelry, so the stronger performance in silver prices supports the idea that “the global economy is in better shape than feared in mid-2022.” Colas attributed this largely to China’s reopening and said it was “emerging as a central investment theme” for the first few months of this year.
Much of the hype surrounding China’s economic reopening focused on the prospect of stronger demand for oil and energy, temporarily lifting crude to its highest since November.
Many industrial metals also benefited as Covid-related restrictions eased in China, the world’s biggest consumer of metals. Comex copper and iron ore futures rose nearly 11% in January.
Silver’s outperformance over gold over the past three months was “mainly driven by actual or future demand for silver driven by industrial use factors such as the reopening of China and other slowly awakening economies, supply constraints and expected growth in overall demand,” it said. Michael Cugino, President and Portfolio Manager of the Permanent Portfolio Family of Funds.
But this is not the whole story.
Demand for silver is expected to rise not only from conventional industrial needs such as construction and technology, but also from a global push for clean energy production and related products such as electric vehicles, Cugino said.
Michael Guyed, portfolio manager at ATAC Fund Family and publisher of the Lead-Lag Report, notes that there is also “broader global risk sentiment as emerging markets outperform, US discretionary stocks lead and domestic commodities play the lumber.” like rising growth expectations and rising housing”.
All that said, the rise in industrial metals this year is only partially driven by China’s recovery, he says.
The value of silver as a precious metal is also likely to support prices. Comex silver futures settled at $23,609 per ounce on February 1.
Keith Weiner, founder and CEO of Monetary Metals, views silver as primarily a monetary rather than an industrial metal.
He believes that the price of silver correlates better with gold than with copper, and that gold and silver “tell a story of monetary decline.” Silver’s path is higher as the US dollar continues to lose value, Weiner says. The prices of monetary metals, gold and silver, are “opposite to the dollar”.
Both gold and silver have rallied over the past three months, while the ICE US Dollar Index, a measure of the dollar’s international value, has lost more than 8%.
If China continues to reopen and there is no global recession or significant downturn in the U.S. or Europe, Cugino said supply and demand factors could be a “tailgate for crude prices.” Monetary policy can also become a tailwind, he says. The Federal Reserve raised interest rates by a quarter point on Wednesday, marking a slowdown after a half-point increase in December.
With the right mix of factors, silver could go much higher, “to $30 easily,” Cugino said, but also “back to the teens if there’s a significant global or U.S. recession.”