Financial Services Association, April 8 (Editor: Xiaoxiang) For investors in the precious metals market, gold may not be their only or best choice right now — because of the recent stardom of silver, it is even more “dazzling” than gold...

According to market data, the spot silver price once rose above the 28 US dollars/ounce mark in the morning of the day, breaking the highest level in nearly three years. Meanwhile, in the domestic market, the silver price trend is even crazier — the Bank of Shanghai moved higher during the day and directly blocked 7% of the increase position soon after opening.

In fact, although silver continued to decline throughout last year — its performance was far from comparable to that of gold, at the beginning of this year, when gold began to rise at an accelerated pace, silver showed a strong momentum of bravely following suit.

Since the beginning of the year, spot silver prices have increased by more than 16%, and the increase is significantly stronger than the all-time high spot gold price (+13.5%). Similar differences in performance also appeared in the price comparison between New York Gold/ Futures Bank and Shanghai Gold/ Bank of Shanghai.

Mobeen Tahir, director of research at WisdomTree, believes that silver appears to be preparing for its more cyclical performance than gold. He wrote in an analysis report earlier this month that given the strong correlation between these two metals, a strong and continuing rebound in gold also bodes well for silver.

“Silver often finds itself in a race against gold. This kind of competition often tempts investors to place bets. “And in recent weeks, it seems like this competition is once again gaining momentum — bringing people to the spectator area,” he said.

In March, spot silver prices surged more than 10%, and so far this month, even though only a few trading days have passed, silver prices have further soared by more than 11%. Undoubtedly, this has caused many investors, who originally only focused on gold, to turn more attention to silver.

Tahir said that a combination of historical and structural factors has made the current market “an interesting scene” for precious metals investors.

Tahir pointed out that in the long run in history, the correlation coefficient between silver and gold is close to 0.92. This means that when gold rises strongly, investors often expect silver to do the same, but data also often shows that there will be a slight gap between the rise in gold and the subsequent rise of silver.

Now, it seems like it's time for silver to go through this gap period and begin to catch up with gold. Judging from the performance of the gold to silver ratio, the current gold to silver ratio in the London spot market is around 90 and is still at a high level in history — its long-term average is about 52.

If the gold-silver ratio gradually corrects to the long-term historical average in the future, it may mean that the next increase in silver will far exceed that of gold.

Are silver fundamentals not lacking in upward momentum?

For many precious metals investors, there is one point where they may be more concerned about buying silver than buying gold — the current benefits of gold are relatively clear: global geopolitical conflicts have triggered safe-haven purchases of gold, and central banks are increasing their gold reserves due to reasons such as de-dollarization.

In contrast, the above favorable factors are actually not that obvious for silver, which has weaker financial properties than gold.

Undoubtedly, these concerns are real, and people cannot avoid them when investing in precious metals. However, that doesn't mean that silver doesn't have some of its unique advantages.

Due to heavy reliance on industrial demand, silver is often more closely linked to the economy than gold. In other words, while gold is generally viewed as a safe haven during a recession, the value of silver is more likely to fluctuate as the economy changes. Currently, the continued heat of US economic data and the overall recovery of global manufacturing PMI are actually quite beneficial to silver.

More than 50% of total physical demand for silver comes from industrial applications such as electronics, solar panels, and electric vehicles. Prior to that, the silver market had been experiencing supply shortages for several years in a row.

In particular, the rapid development of the photovoltaic industry continues to drive the increase in demand for silver. According to a set of industry statistics, the amount of silver used in photovoltaics is expected to increase by 26% and 8% in 2024 and 2025, respectively. Furthermore, the development of AI technology will also become an important driving force for the increase in demand for silver. Shipments of AI servers and switches are expected to continue to grow, driving demand for silver-containing components.

The report released by the International Silver Association in January this year predicts that by 2024, global demand for silver will reach 1.2 billion ounces, which will be the second highest level in history, as industrial demand is expected to reach record highs and demand for jewellery and silverware will improve.

Silver bulls have targeted the $30 mark

Predictably, if the central bank's monetary policy background becomes more favorable later this year — for example, if the Federal Reserve officially starts a cycle of interest rate cuts, silver investment will benefit even more.

Unlike gold, which has repeatedly broken record highs, the current price of silver is still far below the historical peak of more than $49 per ounce set in April 2011.

Earlier this month, Citi raised its 3-month price targets for gold and silver by 9% and 16%, respectively, to $2,400 per ounce and $28 per ounce; and raised the 6-12 month bullish scenario target price caps for gold and silver to $3,000 and $32 per ounce, respectively. Citi said that under the bullish scenario, the gold market reached an average price close to 2,500 US dollars per ounce in the second half of the year, and the possibility that silver would reach an average price of 30 US dollars per ounce has increased.

John Roque, a technical analyst at 22V Research, also wrote in last week's report, “It seems that silver, which had been lukewarm before, is finally ready to join the rising ranks of gold. $30 is the first target, and once broken, the second target is likely to go straight to $40.”

On the technical side, what has long been relished by many precious metals analysts is the “cup handle shape” that silver has shown over the past 40 years. Chris Kimble, a well-known technical analyst in the industry, said that it took 31 years for silver to form a very large “cup-shaped” shape, and then 11 years after that, it formed what appeared to be a “handle.” Currently, silver is trying to break through at (1). If successful, this would be a very bullish sign and could push silver to “top of the cup” near $40.

A recent research report by Guojin Securities Research Report also pointed out that since March, gold prices have risen sharply in the short term, silver inventories have remained deflated, and silver COMEX futures and silver ETF holdings have increased. In terms of commodity attributes, global mineral silver supply growth is limited, and photovoltaic+AI drives industrial demand growth. It is expected that silver supply and demand will remain in short supply and demand fundamentals, and the fundamentals of supply and demand will provide strong support for silver prices; in terms of financial attributes, it is expected that continued increase in market attention will further stimulate demand for silver investment and trigger a rapid rise in silver prices.

Everbright Futures, on the other hand, believes that if the market is still optimistic about gold, capital may be diverted to silver. In particular, from a fundamental point of view, silver will benefit from the rapid development of photovoltaics. The World Silver Association expects that in 2024, silver will still have a certain supply and demand gap, so when gold continues to reach new highs, it will inevitably drive silver's bullish sentiment. Currently, silver has broken through the upper edge of the fluctuation range, and the certainty is greater than gold.

Editor/Somer