(Kitco News) - The gold market continues to hit new highs, with prices pushing above $2,600 an ounce. Silver is being swept up in the new momentum, but one research firm expects it will remain in gold’s shadow.
Last week, gold made another unprecedented run to a new record high, rallying over 3%; however, silver saw an even bigger surge, jumping 10% as prices pushed above $31 an ounce.
Although silver experienced a significant move last week, its broader price action compared to gold remains relatively muted. The gold/silver ratio has managed to hold support above 83 points, well above the May low of 72.67 points.
December silver futures last traded at $31.010 an ounce, down 0.24% on the day. Silver’s rally back above $31 has pushed prices up 23% so far this year. Meanwhile, December gold futures last traded at $2,607.40 an ounce, down 0.13% on the day. Year-to-date, gold prices are up nearly 26%.
In a report published last week, commodity analysts at Capital Economics said they were in the process of upgrading their silver price forecast, but they warned that it won’t match their bullish outlook on gold.
Last week, the British research firm said they expect gold prices to end next year at $2,750; however, the analysts still see prices finishing this year at $2,200 an ounce.
In his latest report, Hamad Hussain, Assistant Climate and Commodities Economist at Capital Economics, said he expects silver to move higher, even as it underperforms gold.
“Some of the tailwinds that have boosted the gold price, like lower Treasury yields and a weaker dollar, have also supported silver in recent months. Given that silver tends to move in tandem with gold, and with our view that gold prices will be higher by the end of next year, silver prices are likely to rise too,” he said. “But the upshot is that silver prices are unlikely to rise as strongly as the 10% increase we expect in gold prices between now and the end of 2025.”
Capital Economics expects that retail demand for silverwill remain strong through 2025; however, they anticipate that weak industrial demand will weigh on prices. Analysts note that roughly 50% of silver demand comes from industrial uses.
“Our expectation that growth will slow in China next year will weigh on industrial metals prices – silver included – and implies a higher gold/silver price ratio,” said Hussain. “Moreover, the head of China’s solar industry association has called for greater consolidation in the industry, given the financial pressures facing even the largest solar manufacturers. This may slow the pace of growth in silver demand from the sector in the near term.”
In April, the Silver Institute said that the silver market is expected to see its second-highest deficit in two decades this year, driven by record industrial demand.
According to its annual survey, industrial demand for silver is expected to rise to 710.90 million ounces, up 9% from last year. At the same time, demand is being driven by the solar sector, as silver usage in photovoltaic (PV) solar panels is expected to rise by 20% to 232 million ounces.
