Silver has also had an excellent year, much like gold. There is still more upside to come.
The COMEX silver price has risen by 32% this year compared to the start of the year.
Silver has also been boosted by geopolitical tensions, interest rate reductions by the US Federal Reserve and investment demand.
The gold/silver rate remains at an 86.
Carsten Fritsch said, “Silver is still cheaper than gold.”
The March COMEX silver contract is $31.793 an ounce at the time of this writing. Meanwhile, the February COMEX gold contract is $2,669.74 per ounce.
Drivers of Silver Price
Silver prices on COMEX reached a 12-year-high of just below $35 per ounce at the end of October.
Fritsch stated that the price had dropped to a little over USD 30. This would be the highest level for year-end since at least 2012.
Silver is also supported by interest rate reductions and the prospect of more interest rate reductions by central banks.
In two separate meetings, in September and November, the US Fed cut interest rates 75 basis points.
The bank is expected to reduce rates by another 25 basis points at its policy meeting later this month.
Fritsch said:
Silver is an investment metal, despite its heavy industrial use.
As such, despite the fact that silver demand has fallen to its lowest level in four years, coins and bars still represent around a sixth of it.
Both the Silver Institute as well as Metals Focus forecasted that this year, demand for exchange-traded silver funds (ETFs), is likely to increase.
The demand for ETFs has been negative in the past two years.
Silver demand is high in industries
Commerzbank AG reports that silver demand in industrial applications is “continuing record after record”.
The German bank stated that industrial applications account for nearly 60% of the total silver demand.
Demand for electrical and electronics applications, notably photovoltaics (particularly solar cells) and e-mobility.
Fritsch also said that the demand for silver for photovoltaics had more than doubled over the past three years, and is now nearly equal to that of bars and coins.
The demand for silver and jewelry has also stagnated in the last few years.
Fritsch said that “rising industrial demand” will ensure that the physical silver demand (excluding ETFs) will increase this year, and will reach its second highest level after 2022.
The Silver Institute and Metals Focus have also predicted a significant supply deficit on the silver market for this year.
Silver prices will likely rise in the long-term as demand for silver increases.
Silver shortage
Metals Focus’ and the Silver Institute’s forecasts show that, even though silver is expected to reach an 8-year supply high in 2024 the market will still be undersupplied with 182 million ounces.
Commerzbank predicts that the 2024 supply deficit will be lower than the previous year and the market will remain undersupplied for a fourth consecutive year.
Fritsch stated that if ETF inflows were taken into consideration, the deficit could even be higher than the previous four years.
Fritsch noted:
If the demand for silver in industrial applications continues to grow and the recent weak demand for physical investment returns recovers, the deficit, excluding ETFs, could be even larger than it was this year, and may reach the record deficit in 2022 when the physical demand outstripped the supply by 261 millions ounces.
Silver Institute and Metals Focus both expect a deficit in supply next year. The organizations haven’t yet provided any figures.
Silver Price Outlook
In such an environment, the correction of silver prices in November was a great opportunity for investors. Kitco.com stated in a recent report.
Rich Checkan said that while gold broke records this year, achieving 39 new record closes, the price of silver is still far from its previous bull-market high of $50 per ounce. Checkan was speaking in a Kitco.com column.
Silver bugs may be disappointed. However, historically, the metal tends to trail behind gold for a long time before it overtakes gold’s gains.
Checkan stated that the current “perceived laziness” of silver prices is a great opportunity for investors.
Commerzbank predicts that silver prices will rise to $32 an ounce in 2025, and to $33 per ounce at the end of the year.
The German bank expects that the ratio of gold to silver will also fall to 80 percent by 2025.
This post Analysis of silver prices poised to rise further amid rising industrial demand first appeared on The ICD
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