Silver Price Has Decreased This Year. Is It a Moment to Buy?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Hard times, economic downturn, runaway inflation – usually, all these terms are synonymous with investors seeking out secure financial havens. If the US dollar loses its strength, then such safe havens are typically precious metals, namely gold and silver. Yet curiously, silver, denoted as XAG, appears to lack any notable growth in 2023. Why? And what trumps can silver have compared to gold?
Let's start by looking at the chart for a popular safe haven – gold. The chart below proves that the XAUUSD has had a successful 2023, with a 4% increase since the beginning of the year.
Now, let's turn our attention to silver, the younger sibling of gold. The USD has weakened as the Fed’s interest rate hiking cycle comes to an end. Logically, silver (XAG) should have gone up but no. Not even close.
So, why watch Joker, if you have Taxi Driver? We mean, why consider silver when gold is an option? Both metals commonly move inversely to the USD and serve as a safe haven for investors when stock markets and the US dollar are in turbulence. However, gold has consistently performed better, even over a five-year period.
Well, silver also has its merits. It’s not only a precious metal but also an industrial one. Silver is used in producing smartphones, 5G technology components, cars, solar panels, and other high-technology products. In essence, the XAG growth drivers are global economic growth, industrial demand, consumer spending power, and related factors.
Obviously, all these economic factors are not performing at their peak. Also, low demand contributes to maintaining high silver reserves. Given these facts, the lack of significant growth in XAG's price isn't surprising.
The world economy is usually cyclical. If we're in a crisis now, growth should follow. This could provide a boost to XAG's value.
Most experts agree that silver is an undervalued metal right now, priced at around $22, inexcusably low. That’s why many analysts anticipate an increase in silver's price in the 2-5-year horizon. While specific targets are hard to predict, projections range from $50 to $100 over five years. The consensus is that silver holds promise.
Of course, it doesn’t mean that you should rush to add XAG or silver-based assets to your portfolio right now. After all, the duration of silver's undervaluation is uncertain. The decision ultimately rests with you, based on your analysis.