Silver supply squeeze

Underappreciated and Undersupplied, Silver is Poised to Break $30

EDITOR'S NOTES

The spotlight in the precious metals market is shifting, with silver poised to outshine gold as it gears up to surpass the $30 mark. Analysts at ANZ are spotlighting the chronic undersupply gripping the silver market, which coupled with a burgeoning industrial demand, is setting the stage for a notable price surge. As the world leans more on technological advancements and renewable energy, silver’s dual role as both an industrial stalwart and a monetary metal becomes increasingly critical. With the market dynamics skewed towards a supply deficit, now is the time for silver enthusiasts to watch as their favored metal prepares to climb to new heights, outperforming gold and redefining market expectations.

Volatility has picked up in the precious metals market, but one new trend is emerging as the silver market wakes up and starts to outperform gold.

In a report published Monday, commodity analysts at ANZ said that silver still has significant potential even after hitting solid resistance at $29.90 on Friday.

The gold market is starting the week with some consolidation after it was unable to hold gains above $2,400 an ounce. June gold futures last traded at $2,375 an ounce, roughly flat on the day. However, silver continues to be the metal to watch as it currently trades at $28.70 an ounce, up more than 1.% on the day.

The gold/silver ratio also continued to fall sharply, dropping to 82 points, its lowest level since early December.

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“We expect gold to trade near USD2,500/oz and silver to move above USD31/oz by the end of 2024. We expect the gold-silver ratio to normalize to 80x by year-end 2024 after hitting a high of 91x in February 2024,” Senior Commodity Strategist Daniel Hynes and his team at the Australian bank wrote Monday. “We lift our gold and silver price forecasts’ trajectory through 2024 and 2025 as key market drivers – easing rate cuts and a weaker dollar– are yet to materialize.”

Tensions appear to be easing in the Middle East after Iran’s rocket and drone attack during the weekend was largely intercepted by Israeli and U.S. forces. Some analysts note that easing geopolitical risk creates less safe-haven demand for gold, while market sentiment supports global economic activity, which boosts silver’s industrial demand.

Along with its role as a monetary metal, Hynes said that he expects silver to outperform gold as industrial demand picks up and supply remains constrained.

“Slower mine production growth and strong industrial demand suggest supply is lagging demand. This will keep the market in a structural deficit. An upturn in the electronic cycle and potential demand growth from the solar sector bodes well for silver’s industrial consumption,” the ANZ analysts wrote. “An undersupplied market leaves room for further withdrawal of above-ground inventories with the London Bullion Market Association (LBMA) and exchanges. Multi-year low stocks along with negative market balance warrant higher silver prices.”

This article originally appeared on Kitco News

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