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Darling All,
Disclaimer: Please note this is not investment advice.
But you will need a large cup of caffeine!
Following Baroque Rocks’ recent Knowledge Drop on Gold’s glittering ascent – now brushing the headline stealing USD $4,000 mark ($4,200 to be quite precise) – it felt only fitting to turn our gaze to Gold’s sibling and the new darling of the market: Silver!!! Oh yes, my magnificent Magpies make way for the Silverbugs! Silver is stepping into the limelight with a powerful price surge of (USD $53.00 an ounce) propelled by industrial demand, stagnated supply, global policy shifts and to coin our own “Silver Plated Fomo!”
The Economics of Silver
In the hierarchy of precious metals, Silver has always been known as “the poor man’s Gold,” a now most outdated moniker to say the least! Silver wears two crowns so to speak, as it is both an industrial and investment metal. Unlike Gold which gleams mostly in Central Bank vaults or in jewellery form, Silver powers the modern world. By this we mean it runs through solar panels, semiconductors and electric vehicles inter alia, and not forgetting a nod to jewels and tableware. Investors watch what is known as the “Gold-Silver Ratio.”* A centuries old gauge of how many ounces of Silver it takes to buy one of Gold. In short, Silver is often described as a “High-Beta Metal”** and tends to magnify Gold’s moves by rising further in rallies and falling harder in corrections.
*Gold Silver Ratio:
In the Precious Metals world, the Gold-Silver Ratio is a centuries old barometer of balance and measures how many ounces of Silver it takes to buy one of Gold. When the ratio widens, Silver lags, signalling for caution or reduced industrial demand. When it narrows, Silver outperforms, rising faster or falling less and is reflective of a confidence in global growth and a growing risk appetite.
** High-Beta Metal:
In market terms, “beta” measures how strongly an asset moves compared to the overall market. An asset with “high-beta” ie Silver is more volatile (both up and down) and tends to move sharply amplifying market swings and is usually associated with higher risk and potentially higher reward. Whereas Gold for example is known as “low-beta” and moves less and is more stable and defensive. In context therefore when Gold prices rise, Silver often rises more and when Gold falls Silver tends to fall faster which is why in economic jargon analysts sometimes refer to Silver as the “High-Beta Version of Gold,” i.e. it behaves like gold but with greater intensity!
The Drivers Behind Silver’s Surge
Silver’s rally, is powered interestingly more by the industrial aspects than the bejewelled ones. Industrial demand is soaring thanks to the push for Green Energy via solar panels and electric vehicles not mention semi-conductors and next generation technologies like AI etc all craving Silver’s conductivity. Effectively demand keeps outpacing production!
Now as Silver follows Gold’s trajectory and as Baroque Rock’s discussed in the latest ‘Gold Knowledge Drop’, a weakened US Dollar, the prospect of lower interest rates, heightened geopolitical jitters and a fresh wave of safe-haven buying, means Silver is very much on an upward trend!
At this juncture we thought it of note as Silver has traditionally not been a standard reserve asset due to its volatility, that Russia’s Central Bank in October 2024 had been reported to add Silver to its reserves for the first time diversifying from traditional Gold, Platinum and Palladium holdings. It’s also rumoured that Russia has been making undeclared Silver purchases too. Russia, is the world’s eighth-largest silver producer with an annual output of 38.5 million ounces, appears keen to capitalize on the undervaluation of Silver compared to other precious metals. As yet, no other Central Bank has added Silver to its strategy, though China and India may soon follow and Saudi Arabia is ploughing into Silver ETFs.
Of note though, JPMorgan, Baroque Rock’s old alma mater, reportedly has the largest institutional stockpile of physical Silver estimated at around 700 million ounces. The figure hasn’t been officially verified as Silver markets are more opaque than Gold, with institutional holdings typically less transparent and harder to confirm. Now this figure is interesting as back in early 2012 JPMorgan’s holding was estimated at less than 5 million ounces and by 2015 it had jumped to 55 million ounces so the widely cited figure from the street of 700 million ounces is really interesting.
Current Forecasts from the Banking Titans
According to Reuters, JPMorgan forecast Silver to maintain its upwards trajectory through 2026, riding the coattails of Gold’s strength and industrial demand! At time of writing, the Silver price which currently stands at the aforementioned USD $53.00 an ounce has actually surpassed Goldman’s, Citi’s etc forecasts….
The Final Silver Linings Word
Silver has always followed Gold’s glow — yet it remains the metal of motion: part investment, part innovation, part aesthetic!! And Magpies whether you are fully fledged Silverbug or not, there is no mistaking it – in this uncertain era, Argentum’s silver lining is unmistakenly shining!
Stay sparkling!
With love from Emma and the Baroque Rocks Team
P.S. If you like what you read and it brings a smile, do spread the sparkle and share it with friends!
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