Skip to main content

Silver may have the power to reach the $30 per ounce milestone after its 26% surge in March-April on the back of gold’s record run and copper’s strength, even though analysts say the metal is ripe for a technical correction.

Silver - both an investment asset and an industrial metal used in electronics and solar panels - may also find it hard to hold on to $30 without a recovery in global manufacturing activity and investment demand from funds.

“Silver is starting to behave much more as a precious metal than an industrial metal,” said Philip Newman, managing director at consultancy Metals Focus.

“There has been a dramatic fall in the gold-silver price ratio since the start of April, and from the technical point of view the market may see a correction, but there is still considerable momentum which means it could still hit $30.”

The gold-silver ratio, denoting how many ounces of silver one ounce of gold can buy, is used by the market to gauge future trends as it indicates silver’s current performance against its historical correlation with gold.

Spot silver prices were last up 0.9% at $28.44 per ounce. They touched $29.79, their highest in more than three years on Friday as gold extended its March-April rally.

The last time silver hit the $30 price level was in February 2021, but sustaining it for an extended period has eluded silver for more than a decade.

Investment demand for silver could help to push prices to around $32 in the second half of 2024, Citi said in a note.

But the metal’s volatile past means its current rally has been viewed with caution by some sector analysts.

“Silver is renowned for its ability to drop hard and fast,” said StoneX analyst Rhona O’Connell. Silver jumped to almost $50 in 2011 and then dropped to $12 in 2020.

On the fundamentals side, the silver market faces the fourth year of a structural market deficit due to expectations of higher industrial demand in 2024, Metals Focus said in a research produced for industry body the Silver Institute.

Macquarie estimates that silver market deficits will persist throughout its 5-year forecast window, even though ample visible and individual stocks continue to cover the shortfall for now.

But uncertainty over the global economic outlook, especially in the electronics sector, which is crucial for silver’s industrial consumption, could constrain the metal in the near term.

Phillip Streible, chief market strategist at Blue Line Futures in Chicago, said the silver market will need to see a manufacturing recovery and increase in solar demand for prices to trade above the $30 mark.

In big silver consumer China, March factory activity expanded for the first time in six months.

There are green shoots from other parts of the market with some inflows to physically-backed silver exchange traded funds (ETFs) in April, but they also have not yet formed a sustainable trend.

“Recent weeks have seen a reversal of ETF flows and I think that is a function of rising silver prices. In other words, the ETF flows have followed the price rather than lead it,” said Maria Smirnova, senior portfolio manager at Sprott Asset Management.

“Therefore, if the silver price rally sustains, then the ETF flows will continue and even accelerate,” she added.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe