Silver prices have been volatile recently due to profit-taking in the gold market, but the volatility seems to be calming down amid expectations that the Federal Reserve will cut interest rates before the end of the current quarter. In this context, commodity analysts at Bank of America, led by analyst Michael Widmer, expect silver to regain its strength and outperform gold again.
Although silver is more volatile due to being a smaller market, Widmer noted in his report that silver has stronger fundamental support. Despite intermittent increases in gold risk indicators in recent months, silver has maintained a high risk indicator since the spring, reflecting the fundamentally positive outlook for silver.
Gold prices recently reached over $2,400 per ounce, while silver is testing resistance at $29 per ounce. This gold outperform has pushed the gold-to-silver ratio to a two-month high of 86.79, but the momentum is starting to shift in silver’s favor again, as the ratio is currently trading at 84.3.
Bank of America expects silver prices to average $28 per ounce this year and jump to $34.50 per ounce in 2025. Widmer believes the ratio will drop by 10 points by the end of the year, as he expects silver to outperform gold on the back of increased industrial demand.
Widmer added that stable economic growth and increased demand for green energy will boost industrial consumption of silver, noting that silver consumption in China has increased due to its growing use in the solar industry, while domestic production has slowed due to a supply shortage in global mines.
He also noted that demand for silver from other countries such as the United States and Japan has improved. Solar panel manufacturers have also increased their use of silver in recent years, with the China Solar Industry Association (CPIA) estimating that the sector consumed 220 million ounces of silver last year.
However, supply from mines has not kept pace with consumption, with silver prices remaining in a tight range between 2020 and the first quarter of 2024, averaging around $23.5 per ounce, due to healthy inventories.
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