Spot silver - both an investment asset due to its relationship with gold and an industrial metal - rose to $32.71 per ounce on Thursday, its highest since December 2012, and has gained more than 35 per cent so far in 2024, leading the precious metals complex.
China's central bank unveiled its biggest stimulus this week since the COVID 19 pandemic and is expected cut its seven-day reverse repo rate. The US Federal Reserve lowered interest rates with a half-percentage-point reduction last week.
"China stimulus is giving industrial metals a boost, something silver traders had been waiting for," Ole Hansen, head of commodity strategy at Saxo Bank, said.
"Continued gold strength combined with stable to higher industrial metal prices should see silver continue to outperform gold, with the gold/silver ratio falling back towards the 70 to 75 area, potentially driving a 10 per cent outperformance in silver," Hansen added.
The gold-silver ratio, denoting how many ounces of silver one ounce of gold can buy, is used by the market to gauge future trends as it indicates silver's current performance against its historical correlation with gold.
"Interest rate cuts should provide a bullish impulse for global activity and support silver consumption. We see prices rising to $35 over the next 3 months and $38 over the next 6-12 months," Citi analyst Max Layton said.
Macquarie, which expects that silver market deficits will persist throughout its 5-year forecast window, said investor flows are likely to remain key for near-term price action, with ETF holdings arguably offering the greatest scope for support.
However, consolidation in China's solar industry and slower growth in the world's second biggest economy could pose headwinds for silver in the near-term.
China stimulus, mighty gold put silver on a streak
Silver up more than 35pc in 2024
FE Team | Published: September 27, 2024 21:27:12
China stimulus, mighty gold put silver on a streak
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