Silver: Stepping out of Gold's shadow – Commerzbank

In mid-October, the Silver price exceeded the $50 per troy ounce mark for the first time, reaching a record high. At the end of November, this record was broken once again. The current all-time high is almost $59. The price of Silver has doubled since the beginning of the year. This means that Silver is also on the verge of its strongest annual increase since 1979. The price increase for Silver is also stronger than that for Gold, as reflected in the decline in the Gold/Silver ratio to 72. The last time the price ratio was lower was in August 2021. The current Gold/Silver ratio is now below the five-year average, but still slightly above the average for the past 46 years, Commerzbank's FX analyst Michael Pfister notes.

Silver hits new record high near $59

"This undervaluation was a key reason for the sharp price increase between early June and late September. During this period, there were strong inflows into the Silver ETFs tracked by Bloomberg of almost 3,000 tons. The price increase since October is due to a local shortage of Silver supply, initially in London and currently in Shanghai. The current forecasts by the Silver Institute and Metals Focus also show that the Silver market is tight. According to these forecasts, the Silver market is likely to show a supply deficit of 95 million ounces this year."

"Since Silver is no longer significantly undervalued relative to Gold, its individual surge is likely to end soon and the price of Silver will once again move more in line with the price of Gold. The tight market situation remains a price-supporting factor. However, due to the sharp rise in prices, there could be attempts to reduce the use of Silver in industrial applications (thrifting) in order to reduce costs. However, it is questionable whether this is still possible with solar cells without impairing their functionality, as the Silver content in solar cells has already been massively reduced following the rise to $50 in 2011."

"For the supply deficit to disappear, there would have to be a more significant decline in industrial demand, which is unlikely given the continuing rise in Silver demand for solar cells and electric cars. The expected significant easing of monetary policy by the US Federal Reserve is also likely to provide tailwinds for Silver. We therefore expect a further, albeit moderate, price increase to $59 per troy ounce in the coming year. The Gold/Silver ratio would then be 75, meaning that Silver would largely move in line with Gold."