Silver will outperform gold as inflation and economy pick up - Heraeus Precious Metals
(Kitco News) - Despite its dismal performance, silver remains the precious metals to watch. It could outperform gold as the global economy sees a robust recovery, according to one precious metals firm.
In a report published Monday, analysts at Heraeus Precious Metals said that they expect silver prices to continue to outperform gold through 2021 as it benefits from rising inflation and renewed industrial demand as the global economy bounces back from the COVID-19 pandemic.
"Consumption from industrial end-users is forecast to extend to a four-year high of 510 [million ounces] this year, with strong growth from the electrical & electronics and photovoltaic (PV) sectors," the analysts said.
Looking at inflation, the analysts noted that the U.S. five-year breakeven inflation rate around 2.6%, its highest level in a decade. The precious metal refiner noted that short-term inflation has also surpassed long-term expectations.
"Last time the five-year breakeven inflation rate was this high was in 2011 and silver was trading around $48/oz, almost double the current price. With precious metals seen as an efficient hedge against inflation, higher inflation expectations should provide upside for silver," the analysts said.
The comments come as the gold/silver ratio sees a consistent downtrend from last year's historic highs around 125 points. Kitco.com shows that the ratio trading at 69.96, meaning it takes 69 ounces of silver to equal the value of one ounce of gold.
"Silver has recovered some ground relative to gold in April and is favored to outperform gold if the rally continues," the analysts said.
Looking at gold prices, although the precious metal has managed to hold above $1,700 an ounce, the analysts said that it is too soon to tell if the price has entered into a new uptrend. June gold futures last traded at $1,735.20 an ounce, down 0.55% on the day; meanwhile, May silver futures last traded at $24.87 an ounce, down 1.78% on the day.