Despite gold’s impressive streak of record highs this year, it has been outperformed by silver, which has emerged as the standout asset in the precious metals sector. Although silver couldn’t maintain its gains above $32 per ounce, it closed the week at $31.816, marking its highest weekly close in 11 years and reflecting a 1% increase from the previous week.
Year-to-date, silver has surged over 32%, compared to gold’s nearly 29% rise. This renewed interest in silver is partly attributed to a significant stimulus package unveiled by China, its most ambitious since the COVID-19 pandemic began in 2020.
The Chinese government announced a CNY1 trillion injection into its largest state banks while the People’s Bank of China has aggressively slashed interest rates. Analysts believe that this new economic stimulus could stimulate activity, thereby boosting demand for base metals and supporting silver’s upward momentum.
In a Friday report, Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, indicated that these easing measures could potentially drive silver prices up to $35 an ounce. However, she cautioned that economic recovery in China could have mixed effects.
“Much of the year-to-date performance of gold and silver has been fueled by ‘wealth buying’ from Western investors and ‘fear buying’ from Eastern buyers. Locals are now shifting from gold to equities, with reports of people lining up in China to sell their jewelry. This trend could lead to a significant discount for SGE Gold relative to London Gold, as the focus shifts from fear-based purchases to reflationary strategies,” she noted.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, echoed that while silver has outperformed gold recently, he still regards gold as potentially more valuable. He also warned that both metals might face short-term volatility, as gold prices appear to be losing upward momentum.
“After a series of record highs following a surprising U.S. rate cut, gold prices are stabilizing. We’re seeing signs of buying fatigue, which raises questions about whether we’re approaching a necessary consolidation or even a correction,” Hansen stated. “I believe silver remains relatively inexpensive compared to gold and anticipate that it will continue to perform well. However, a correction seems overdue, so I don’t foresee significant further upside in the immediate future.”
Market analysts like Lukman Otunuga, Manager of Market Analysis at FXTM, believe silver will likely continue to mirror gold’s trajectory. He emphasized that sustaining silver’s recent rally will require higher prices, highlighting $32.70 as a crucial pivot point.
“A breakthrough above $32.70 could pave the way to $34, while failure to hold that level could see prices retreat to $31.20 and $29.60,” he warned.
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