Silver and gold are both precious metals, but silver has an additional characteristic: It is used in industry. Both substances, as commodities, are volatile, but silver’s use as an industrial metal has spurred its price lately, as Wall Street has awakened to its increased potential.
For the last three months, from November 2022 through January, Comex silver futures shot up almost 25%, ahead of gold’s 19% increase, according to DataTrek Research. Demand for silver is estimated to have reached a record high of 1.21 billion ounces in 2022, up 16% from the prior year, per the Silver Institute. Gold demand was up, too, some 18%, although it failed to match its 2011 record, the World Gold Council found.
The burgeoning of silver is a positive economic indicator, Nick Colas, DataTrek’s co-founder, wrote in a report. The three-month futures results represent a “statistically unusual amount that shows the precious metals market is bullish on global economic growth in 2023,” which he contended means it “is in better shape than feared in mid-2022.” With the dollar dropping, chalk up another tailwind for silver, as well as gold: both typically move inverse to the buck.
In addition to its use in jewelry, silver is found in products ranging from batteries to semiconductors. China’s reopening will lead to even higher demand for silver, Colas stated. Further, silver is in high demand for renewable energy equipment, Michael Cuggino, president and portfolio manager of the Permanent Portfolio Family of Funds, told CNBC. In 2021, 114 million ounces of silver were used to create solar panels. It also is used in electrical vehicles and 5G technology products.
Some 60% of silver is employed for industrial purposes, with the rest for tableware and ornamentation—and for investing. Gold is used in jewelry and as an investment. Copper, another metal heavily used by industry, also is up significantly in recent months.
For investors, a big attraction is that silver appears to be undervalued. The silver-gold ratio now is at 83:1, when historically it is 15:1—meaning it currently takes 83 ounces of silver to buy one ounce of gold. A spread that wide usually results in a strong run for silver prices, according to an analysis by the SchiffGold online newsletter. With such a gap, it declared, “Silver doesn’t just outperform gold, it goes on a massive run in a short period of time.”
Gold has had an allure since ancient times that no other metal can match. But at the moment, investors in the less-sexy substance see a silver lining.