Despite gold prices hovering near record highs, silver continues to underperform in the precious metals market, struggling to maintain gains above $25 an ounce.
Analysts, however, remain optimistic about silver’s prospects, citing potential for a turnaround.
Nicky Shiels, head of metals strategy at MKS PAMP, believes silver is establishing a strong support level above $23.50 an ounce, with the potential to reach $28 an ounce this year.
While gold prices remain well supported above $2,150 an ounce, spot silver has dipped to a one-week low, currently trading at $24.36 an ounce, down over 1% for the day. The gold/silver ratio remains elevated, surpassing 89 points.
Despite current challenges, Shiels anticipates a shift in the gold/silver ratio, especially with inflation expected to persist above forecasted levels. She notes that easier monetary policies globally and sustained high demand for industrial commodities like silver should lead to a lower ratio.
The Federal Reserve’s indication of potential interest rate cuts this year, combined with robust demand for physical silver, particularly from India, further supports Shiels’ bullish outlook. India’s silver imports remain strong, signaling continued demand even at higher price levels.
Additionally, industrial demand is expected to keep the silver market in deficit, with global demand projected to reach 1.2 billion ounces in 2024, according to the Silver Institute. This, coupled with declining production from major producers like Mexico and Peru, contributes to dwindling above-ground stocks.
Shiels believes that as central banks cut interest rates and geopolitical uncertainties persist, investor demand for silver will likely increase. She suggests that a breakout above $26 an ounce could attract momentum traders, driving renewed investor engagement in silver.
While silver faces short-term challenges, analysts like Shiels remain optimistic about its long-term prospects, expecting it to shine brighter in the future.
