Will silver hit $100 an ounce? It might outperform gold this year, according to this analyst

By:
on May 30, 2024
Listen
  • The silver price has been shining brightly recently.
  • But, according to David Morrison of Trade Nation, silver has the potential to outperform gold.
  • The metal could even reach $100 an ounce in 2024. We interviewed Morrison to find out why.

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

The silver price is currently sitting at $31.26 per ounce at the time of this article’s writing – far above the $23 per troy ounce that it was on average at the start of the year.

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins.

When it comes to precious metal commodities, gold is often the star. Copper and platinum, too, get some interest. But in 2024, it is silver may outshine them all, says David Morrison of Trade Nation:

Personally, I believe the current pullback is temporary. I believe that both gold and silver have plenty more upside, as retail investors have only just started to get involved, and there’s been relatively little commentary in the mainstream media. I also believe that silver has the potential to outperform gold this year.”

We interviewed Morrison on his thoughts on silver’s price movements for the year. Edited excerpts:

Why is silver’s price currently rising faster than gold?

Copy link to section

Historically, silver has always been far more volatile than gold. There are plenty of reasons why this may be. For a start, the silver market is much smaller than gold’s. It tends to be thinner in terms of daily trading volumes, it just isn’t as popular as gold. Prices can swing about on relatively small orders. It is much cheaper than gold, so the market has different dynamics.

Also, silver has significant industrial uses, especially in electronics and solar panels. The growth in these industries boosts silver demand. In addition, unlike gold which gets recycled, loads of silver gets used up and never recovered.

This means that, while plentiful, silver’s supply/demand dynamics are quite different from gold’s. This can lead to some wild price moves when talk turns to ‘when the world runs out of silver…’

Lastly, when the gold price rises, silver often follows, sometimes with a lag. Then it overcompensates, and the market sees stunning rallies. 

Is there a recent historical precedent for this?

Copy link to section

There’s a good chance that we see a rerun of the mania that took place thirteen years ago. Silver prices surged from around $18 per ounce in mid-2010 to nearly $50 per ounce by April 2011.

It was really a mania in precious metals in general. This was driven by high investment demand, speculative trading, and concerns over economic stability following the 2008 financial crisis.

This could happen again, particularly if issues continue to build in US commercial real estate and overall indebtedness. This is the big issue with interest rates being held at current levels for longer than previously expected. Cracks are appearing, and these are filtering down through the banking system. The mini banking crash from last year was contained. The next one will be far more problematic.

Initially in this kind of crisis, all assets are sold off indiscriminately as investors have to raise cash. But then demand grows for ‘safe havens’ and that’s when the mania gets going. 

Specifically, what interaction can you see happening between the gold price and silver price this year?

Copy link to section

Silver has been lagging gold for a long time now. While gold has hit a succession of fresh record highs this year, silver remains a long way short of its own record from back in April 2011. That was when it came close to hitting $50 per ounce. Now its trading around $31 per ounce, which suggests it has the potential to rally sharply to catch up.

The current gold:silver ratio stands at around 74 (that’s the gold price divided by silver). While this is way below recent high of 92 from February this year, it remains well above the 30 level hit back in 2011’.

Let’s say that that the ratio drops back to 50 (from 74 where it is now). Let’s assume that gold doesn’t move from where it is now at $2,350 despite a sharp rally in precious metals. That would imply a silver price of $47 (2350/50) per ounce – just a shade below the 2011 all-time high.

Now, let’s say gold hits $3,000 per ounce. Then a ratio of 50 would mean a silver price of $60. A return to a 30 ratio from 2011, and with gold at $3,000, then the implied silver price is $100. Double the price of its previous all-time high.

Is there any larger significance to the gold-silver ratio changing and getting lower? 

Copy link to section

The gold-silver ratio (the number of ounces of silver it takes to buy one ounce of gold) is a significant indicator for several reasons:

  • Market Sentiment: A falling ratio indicates that silver is outperforming gold, which can signal strong industrial demand and investment interest in silver.
  • Investment Strategy: Some investors use the ratio to determine when to buy or sell silver relative to gold. A lower ratio might indicate silver is becoming more valuable relative to gold.

Understanding these dynamics helps investors make informed decisions in the precious metals market.

Gold Silver Commodity Precious Metals