Silver approaches five-year high with ‘more upside in store’
Mon April 08 2024
Gold’s all-time high may be getting the headlines right now, but silver is also benefiting from the precious metals rally, having just hit a five-year high against the pound.
Spot silver prices are currently sitting at a little over Ł22 per ounce, with dollar-denominated prices at $27.77, nearing the $29.10 five-year high seen in early 2021.
Analysts at UBS suggested silver could still be cheap though, given it’s still 40% below the ATH of almost $48 notched way back in 2011 and "out-of-sync" with the gold price.
Russ Mould at AJ Bell also pointed out that gold currently trades at nearly 85 times that of silver, whereas the long-term average is nearer to 65 times.
“That may be enough to persuade some investors and traders that silver is ‘cheap’ relative to gold,” said Mould.
UBS analysts concurred, stating that “more upside is in store” for silver.
“Silver's rally can be viewed from two angles: A complete out-of-sync move that will reverse, or that the market is front-loading lower interest rates ahead,” UBS said in a research note.
“We think it’s more the latter. We previously argued that the market is underestimating the upside in silver prices given the potential for industrial activity to recover in (the second half of 2024), amid already buoyant industrial application demand, and prospects of rate cuts.
“In that context, it’s notable that ETF demand for silver seems to be turning the corner. Lower silver ETF holdings amid elevated opportunity costs have held the metal's price back until recently.
UBS analysts suggested that silver is a “beneficiary laggard” of lower interest rates from the Federal Reserve tipped for this year. They have tipped silver spot prices to hit $32 an ounce within 12 months.
Source: https://www.proactiveinvestors.com/