A recent article points out that stronger-than-expected industrial data, particularly from China, has boosted demand for industrial metals such as copper and silver. The Silver Institute’s forecasts show that global silver supply will be in deficit for the fourth consecutive year, while demand for the industrial and precious metal is expected to reach its second-highest level ever this year.
One market analyst emphasized: “Silver has a lot of catching up to do in terms of price gains, and this week’s technical breakout from a multi-year consolidation phase could well be the start of a long bull market.”
Silver shortage making itself felt in the market
Daniel Ghali, commodity analyst at Canadian investment bank TD Securities, recently commented on silver. He expects fundamental factors to drive a long-term upward trend for the white metal. Silver’s strength lies in its industrial demand, which accounts for more than 50% of the physical market.
According to Ghali, this is where silver’s greatest potential lies, while gold is only bought as a currency metal in uncertain times. “Silver markets could prove to be the most exciting trade in the energy transition across the entire commodity complex today,” Ghali said. “The energy transition is the investment zeitgeist of this decade, and its impact on silver is often overlooked.”
According to the Silver Institute, industrial silver demand is expected to rise by 4% this year as demand for solar energy and electric vehicles continue to be key drivers of the global green energy transition. Ghali noted that this strong demand growth and significant underinvestment in mining supply have led to a structural deficit.
Ghali added that this imbalance has been largely ignored as markets have instead focused on above-ground inventories. However, according to Ghali, markets have misjudged how much silver is actually available – and this scarcity will drive silver prices higher.
“For many years, market participants could safely assume that above-ground silver supplies were large enough to satisfy any growth in demand,” Ghali said. “Today, we believe that this assumption may be challenged within the next 12-24 months.”
Ghali said that industrial demand, driven by the green energy transition, has completely transformed the silver market. He pointed out that in 2019, it was expected that it would take 165 years for above-ground silver reserves to be depleted, based on mathematical calculations. “Potential ETF buying activity associated with a typical US Federal Reserve interest rate cut cycle could dramatically shorten this timeframe. This poses a significant liquidity risk for silver markets and suggests a potential silver squeeze on the horizon,” he said. “Certain pressure relief valves could ultimately help bring the missing silver back to the markets, but this will require higher prices.”
Performance comparison
Looking at the performance of gold and silver over the past four years, it is striking that the euro price of silver has risen by 130%, more than twice as much as gold at 60%.
While the price of gold is making headlines by repeatedly reaching new record highs, silver is still lagging behind somewhat – which is not a disadvantage, however, but rather an extraordinary opportunity for silver investors.
While the Euro price of gold is currently 57% above its 2012 high, the Euro price of silver (currently just under 26 EUR per ounce) would have to rise by 35% just to reach its 2011 high (35 EUR per ounce).
The Euro price of silver would therefore have to roughly double just to catch up with the current price level of gold – and, as is well known, silver performs even better than gold in the later stages of upward trends, as the following chart shows (i.e., the black curve for silver is above the yellow curve for gold):
The current gold-silver ratio (price ratio between gold and silver) shows that silver is currently still the better choice. This is because the ratio remains at a high level!
Only 3 times in history has silver been cheaper or as cheap as it is today compared to gold.
And whenever silver has been this cheap compared to gold, there has always been a corresponding “correction,” meaning that the ratio has fallen to the lower range, making gold cheaper again compared to silver.
Specifically, this means that it is currently preferable to buy silver rather than gold, as the gold-silver ratio indicates a correction to the lower range.
For the ratio to fall during an upward trend for both metals, silver must rise more strongly than gold. As we saw at the beginning, this is indeed the case: Silver has been rising significantly more strongly than gold since the beginning of the year – and since 2020.
Once the ratio has fallen below the 70 mark, silver investors should consider slowly (or immediately) switching to gold. The chart above shows the 2 phases (highlighted in yellow) in which it was lucrative to accumulate gold holdings (instead of silver), as gold was cheap compared to silver and the ratio rose from a low level.
The following online findings illustrate that the silver price still has room to rise:
Conclusion
In conclusion, the question arises as to whether one should buy or sell in view of the current rise in precious metal prices.
Recent developments clearly show that silver is outperforming gold. While gold is undoubtedly in the spotlight and reaching new record highs, silver remains somewhat in the shadows – but this is precisely where the opportunity lies for savvy investors, as the fundamental conditions clearly point to further price appreciation potential for silver.
Statistics from recent years clearly show that silver significantly outperforms gold in terms of price increases. The Euro price of silver has risen more than twice as much as gold in percentage terms over the last 4 years. In addition, the current gold-silver ratio shows that silver is currently even more attractively valued than gold. Historically, silver has rarely been as cheap relative to gold as it is today, and such phases have usually been followed by a correction that shifts the ratio back in favor of gold.
Given the fundamental market data and the fact that silver rises significantly more than gold during uptrends, it could prove worthwhile to buy silver now rather than sell it. Another sharp rise in the price of silver would not be surprising, and investors could regret missing out on this potential gain. In the past, silver has often risen by more than just a “meagre” 25% during a new uptrend, typically more than doubling in price.
As the following gold price chart illustrates, the last 3 times gold broke out above a significant high (i.e., after several years of sideways movement), there was an impulsive move of 350%. This would bring gold to around $8,600 this time around – and if silver continues to rise twice as strongly as gold, the white metal would stand at around $200.
It may therefore be wise to seize the opportunity now and increase silver holdings. Once the gold-silver ratio falls below a certain level, it may be worth considering switching to gold.
In any case, silver currently appears to be a promising investment opportunity that should be exploited. This is particularly true if the silver price experiences short-term setbacks or consolidation phases, which are not unusual during a longer-term upward trend and should be considered healthy.
How can you buy precious metals cheaply and store them safely?
Elementum Deutschland GmbH, based in Sindelfingen (Germany), specializes in trading physical precious metals. Customers who purchase precious metals from Elementum Deutschland (or one of the other national Elementum companies in five European countries) can store them in the renowned high-security vaulting facilities in the St. Gotthard Massif in Switzerland at Elementum International AG.
Of course, you also have the option of purchasing gold and silver directly and having it delivered to your desired address. However, storing silver in the so-called open duty-free warehouse (“offenes Zollfreilager”) at St. Gotthard offers decisive tax advantages:
- The 19% value added tax customary in Germany is completely waived on purchases and sales – a considerable price advantage that effectively secures you 19% more silver for your money.
- If you store your silver in this high-security vault, you can sell it back to Elementum Deutschland GmbH at any time – without any bureaucratic hassle and also without VAT, as the trade takes place within the duty-free warehouse. You will receive the funds via bank wire.
- VAT is only payable when you physically remove the stored silver – either by picking it up in person (after prior notification) or by having it shipped to your address.
More silver, more return
Thanks to duty-free storage, you receive 19% more physical silver when you buy. This additional amount also participates in the performance of the silver price if it rises – a leverage effect that significantly improves your return opportunities.
Secure your storage space now – free of charge and without obligation
Register now for a storage space in the St. Gotthard high-security vaulting facility and receive free access to:
- our General Terms and Conditions (GTC)
- current fee tables
- annual audit reports from the auditing company BDO AG
- transparent proof of use of funds
- family discount information
- the popular children’s program “Schatz4Kids” (“Treasure4Kids”)
- as well as numerous other documents and information on storage, purchase, and resale, as well as the ratio “switching” strategy.
Register now: https://silberbar.elementum.de/
Tip for discounted entry: Enter the promotional code “50” (“Aktionscode“) and the “Vermittler” number 1000166 when registering to receive a 50% discount on the storage space setup fee.
Important: Registration is non-binding and does not commit you to anything – but it is your first step towards an independent and crisis-proof precious metal investment.
Elementum is a second-generation, owner-managed family business. Trust, consistency, and long-term thinking are at the heart of our philosophy. The Board of Directors of Elementum International AG is composed of internationally renowned experts in the money and precious metals markets, including economists, analysts, university professors, and precious metals specialists. This in-depth expertise forms the backbone of our actions—for your security, your assets, and your future.
About the Author
Stephan Bogner
CEO of Elementum International AG
Stephan Bogner, who holds a degree in business administration, studied economics at ISM Dortmund (Germany) and wrote the university’s first thesis on precious metals as a hedge against inflation. After studying in the UK and Australia and gaining professional experience in Dubai, he took over as CEO of Elementum International AG in Switzerland in 2012. His expertise in precious metals has had a significant impact on the company’s development.
Contact
Rockstone News & Research
Stephan Bogner (Dipl. Kfm., FH)
Müligässli 1, 8598 Bottighofen
Switzerland
Phone: +41-71-5896911
Email: info@rockstone-news.com
Disclaimer: This article reflects the personal opinion of the author. Elementum assumes no responsibility for the accuracy of the content and accepts no liability for its use. This article may contain links to external third-party websites. Elementum is not responsible for the content of these external sites and expressly distances itself from all information provided there. At the time the links were created, no unlawful content was identifiable. This article does not constitute a recommendation to buy or sell. Elementum International AG is a Swiss company that specializes exclusively in the storage of physical precious metals in a high-security vault facility located in the St. Gotthard mountain massif in Central Switzerland. The Board of Directors and Executive Management of Elementum International AG have been selected solely based on their professional expertise and long-standing experience in precious metals markets. As these individuals may also be professionally active outside their roles at Elementum International AG, the company has no influence over their external activities and respects their right to freedom of expression. Therefore, the views expressed by persons working with or for Elementum do not necessarily reflect the opinion of Elementum International AG. Investments in precious metals are subject to risks, including those specific to the structure of this market. Please read our full risk disclosures and consult a licensed financial advisor before making any investment decisions. Neither the author, Elementum International AG, nor Elementum Deutschland GmbH assume any liability for actions taken based on the information provided. Past performance is not indicative of future results.
