Here’s why Silver’s bull run hasn’t even started

Silver has been on a historic bull run for the last two years — at press time, the precious metal is trading in close proximity to a 12-year high. The gray metal has, notably, outperformed gold in that timeframe — buoyed by both high demand and its increasing popularity as a store of value.

Two exchange-traded funds (ETFs) track the spot price of silver and gold — the iShares Silver Trust (NYSE: SLV) and the iShares Gold Trust (NYSE: IAU). At the time of publication, SLV has seen prices surge by 39.69% on a year-to-date (YTD) basis — in the same period, IAU has experienced a 31.84% rally.

Although market sentiment on both precious metals remains bullish, there are significant concerns about whether the current bull run — particularly in silver’s case, is sustainable. 

However, a recent analysis from a macroeconomic strategist points out that the glimmering metal’s rise, impressive as it is, has only just begun.

Gold is actually outperforming silver — relative to recent highs

While gold is currently trading at roughly 44% above its 2011 peak, silver is actually priced approximately 29% below its very own 2011 peak price, as noted by Otavio Costa, a Crescat Capital strategist, in an X post on October 21.

The surge in prices that the yellow-hued metal has seen can be explained primarily by two factors — one, its role as a hedge against inflation and a store of wealth, and two, renewed investor interest on account of the outsized returns that it has provided in the last two years.

Costa opined that gold’s recent move to the upside is caused by the fact that the markets are already pricing in further interest rate cuts from the Federal Reserve — signaling the potential for another significant wave of inflation.

Silver, however, hasn’t seen a corresponding rise yet — although Costa believes it is due in short order.

If this line of reasoning pans out, silver is set to see a renewed surge — to mirror gold’s performance relative to 2011 highs, the gray metal would have to reach prices some 44% above the $46.47 per ounce seen in 2011 — in other words, roughly $66.91 per ounce. 

Compared to prices at press time, which are $33.42 per ounce, this would represent a 100.2% upside.

If its current pace were to be sustained, silver could reach that mark in mid-2025 — potentially even earlier, depending on macro developments.

The Crescat Capital analyst also urged investors to keep a close eye on other metals, as well as commodities — notably, major banks are bullish on copper and nickel, while palladium is set to reach the highest close of 2024.

Featured image:
Піщаний, Володимир, VladKK — February 1, 2018. Digital Image. Shutterstock