Silver bars stored in Singapore. Prices have declined after a recent rally.
Wei Leng Tay/Bloomberg
After silver’s climb earlier this year to the highest prices since 2013, the metal has significantly underperformed sister metal gold. With silver’s value dropping to its lowest in 14 months, some investors may see an opening to buy.
“Silver presents a better opportunity than gold at the present time,” says Jeff Wright, chief investment officer at Wolfpack Capital. However, he warns investors not to rush into the market just yet, especially as a rise in 10-year Treasury yields has fueled a retreat for precious metals that could see prices for both silver and gold move even lower.
Silver has had a very bumpy ride since the pandemic began. Futures prices gained more than 47% in 2020, then settled at $29.418 on Feb. 1 of this year, with a Reddit-induced rally boosting the value of the metal to the highest since February 2013. Prices then saw a volatile retreat, settling at $21.485 an ounce on Sept. 29 to mark silver’s lowest value since July 2020.
“While silver typically finds over half its end-demand from tech and industrial uses, investment flows are what drive prices higher or lower,” says Adrian Ash, director of research at BullionVault. That means silver is facing a “stiff headwind from the global shift toward tighter central-bank policy,” just like gold.
At the same time, silver is also “suffering a sore head after the craziness of 2020 and early 2021,” he says. “Silver squeezed a half-decade of price action into just five months when the Covid crash hit.”
Prices dropped 40% to the cheapest level since 2009 at about $12 per ounce in March of 2020. Then silver raced to eight-year highs—just shy of $30 by February 2021 as that “screaming bargain unleashed record investment demand,” Ash says.
But the rally “vanished as fast as it arrived, leaving the market unmoved within five weeks as much of the speculative buying was quickly unwound,” Ash says.
The losses for silver have outpaced those of gold for the quarter as of Sept. 30, with silver down nearly 16% compared with gold’s 0.8% decline. The poor performance of silver is “relatively surprising” as fundamental factors support the metal in the long term, says Carlo Alberto De Casa, analyst at Kinesis Money.
He pointed to a January Silver Institute report, produced by Metals Focus, that said silver automotive demand is forecast to climb to an estimated 88 million ounces by the end of 2025, from 51 million ounces in 2020. “Investors should put silver in their watch list,” says De Casa. “Silver is getting close to being a bargain.”
Total global silver demand is forecast to climb by 15% this year to 1.03 billion ounces, according to the Silver Institute.
Silver is “currently lacking a strong and popular narrative to attract dollars from generalist investors new to the market,” says BullionVault’s Ash. “But silver’s got plenty of great stories to tell, just like the idea of China’s massive solar-panel installation project a decade ago” spurred record-high silver prices at nearly $50 an ounce, he says.
Wolfpack Capital’s Wright believes there is a “building scarcity” for silver, and a potential “opportunity for folks interested in metals over the long term.”
Taking everything into consideration, investors who wish to invest in silver could take a position in the silver-backed iShares Silver Trust
exchange-traded fund (ticker: SLV), or in silver producers such as Wheaton Precious Metals (WPM), says Wright, who disclosed a position in Wheaton shares. This year, the iShares Silver ETF is down 19%, while shares of Wheaton Precious Metals have lost nearly 8%.
Both are good vehicles for exposure to silver, but “be cautious in regards to timing,” says Wright.
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