The price of gold has hit a historical record, but the price of silver is increasing nearly twice as fast. Euphoric investor sentiment took over the commodities market in May, yet the scenario where platinum surpasses gold in price will not repeat.
Gold prices have risen by 15% since the beginning of the year, while silver prices have increased by 27% (with a peak rise of 34% just days before the end of May).
Gold reached new historical highs, hitting levels of $2,450 per ounce (though after a correction in early June, its price fell to $2,360). Silver, while still far from its all-time highs, is recording its highest levels since 2013, at $32 per ounce. This is not all, as BHP’s attempt to acquire Anglo American, especially its copper assets, is driving the growth of industrial metals, which are also benefiting from the economic momentum in China.
“Silver is unique in that over half of its demand comes from the industry, and its price sometimes behaves like industrial metals, while at other times like precious metals,” says Michał Stajniak, an expert at XTB, in an interview with MarketNews24. “This time, however, demand for both industrial and precious metals is increasing simultaneously.”
This is the fourth consecutive year of a silver deficit. The supply of silver is rapidly growing due to producers in the photovoltaic industry.
The potential for silver price increases remains high, considering that in 2011 its price was at $50 per ounce, so despite recent significant increases, the metal is still nearly $20 cheaper.
The gold-to-silver price ratio is currently around the 10-year average of 80 points, while the 20-year average indicates this ratio should be around 68 points.
What are the prospects for silver price growth? They are good, but significant increases will be challenging.
“With gold prices close to $2,400, silver prices should be around $35,” comments the XTB expert. “And we are close to that.”
However, not all precious metals are rising at the same pace. The price of platinum is around $1,050 per ounce, having increased by 4% since the beginning of the year. Platinum had a good May, with prices rising by 15%, but historically these levels are very low. It is far from gold, although in 2008 platinum was more expensive. Platinum has its own specificity, being used in the automotive industry for the production of catalysts. The automotive industry is facing challenges, hence the low prices of this metal.
Copper also climbed to historic highs in May, with its price nearing $11,000 per ton.
“This is the effect of speculative investors, who have significantly increased the number of long positions on contracts because they are uncertain about the production of refined copper in China,” explains M. Stajniak of XTB. “In the long term, copper has very good fundamentals for growth because it is used in all new technologies.”
