Silver: Where to After Gold’s Record High?

The spot price of gold, meanwhile, hovered at $2,026 and benchmark gold futures were at around $2,033 versus the May 4 record highs of above 2,080 for both.

Silver’s percentage gains have, however, been higher than those of gold since March, when the rally across precious metals began in earnest after a setback in February. As of Monday, silver was up more than 20% since end-February, versus gold’s gain of just around 10%.

Context/h2

A rose by any other name would smell as sweet, we hear. Yet, silver bulls often feel like the neglected stepchild of the precious metals bucket, typically lagging the advance in gold.

What gives?

Well, it’s not just what’s in a name. Gold is more of an inflation hedge; the go-to now for anyone seeking a safe haven in troubled times. Silver, on the contrary, is known as an out-and-out industrial metal; critical especially in renewable energy. Both serve distinctly different purposes.

This year’s banking crisis and the post-pandemic inflation hangover that the Federal Reserve has been fighting with the sharpest rate hikes in 40 years will explain why gold has reached record highs after its previous all-time peak in August 2020.

Silver attained record highs when futures hit $49.56 an ounce in April 2011. Current prices are nearly $25 below that peak.

Silver is a key element in solar panels, due to its usage in photovoltaic power, which drives some of the leading sources of renewable energy globally. With about 20 grams of silver being used in every solar panel, this continues to be a vital source of demand for the metal.

Some say silver also attracted some haven flows during the US banking crisis, only that its standing against gold has been underplayed as always. Yet, silver is closing the gap now in performance, having already surpassed gold’s percentage gains for the year.

Jeff Clark of TheGoldAdvisor.com said in an interview published in April that just as gold has potential to reach all-time highs above $2,500 this year, silver could surpass $30.

"I think this is the time you need to get long,” Clark said in comments carried by Investing News Network. “I don't think — gold's not going back down to US$1,500, silver's not going back down to $15. The only way they would have a crash at this point is if all markets crashed like we saw in the COVID crash — everything crashed temporarily. That's the only thing that's going to cause that."

When it comes to silver, Clark noted that the white metal tends to outperform gold when it starts to move. He adds:

"I do still think silver is going to go to $30 this year. The reason is because once silver gets going, silver is very spiky, it's very volatile. It's almost violent sometimes in how much it rises or falls, so if you have a rise in gold, silver's going to outperform it. We've seen this repeatedly throughout history," he said. "So if gold does rise, silver is going to follow it."

Outlook/h2

The momentum behind silver since its recovery from the August tumble of 12% — which marks its worst monthly decline since an 18% plunge in September 2020 — suggests a series of highs that could take the metal to a peak of $30 at some point, charts show.

A sustainable break above $26.92 is likely to extend spot silver towards $27.80 and $30 in the mid-term, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com

But before it gets to the $26.92 level, spot silver will probably be put a maze of twists, Dixit said, adding:

“On a mid-term perspective, sideways consolidation can hardly be ruled out, which eventually adds energy for a bigger move north, with $26.15 as the initial leg higher, followed by $26.92. This is possible as long as prices sustain above the 5 week Exponential Moving Average, or EMA, of $25.20 and the horizontal support zone of $24.65 - $24.45.”

Going forward, the short-term price action may remain range-bound within the 4-hour Middle Bollinger Band of $25.73 and the 4-hour 100 Simple Moving Average, or SMA, of $25.22, Dixit said, adding:

“Broader outlook remains bullish as long as the breakout zone of $24.65 - $24.45 is not violated.”

On the flip side, failure to break through $26.92 or rejection from this zone will eventually put silver back on the correctional path to revisit support areas of $24.65 - $24.45.

“If this is broken, we can expect further resumption of the downside momentum towards $23.10, followed by $21.80.”

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Disclaimer: The content of this article is purely to educate and inform and does not in any way represent an inducement or recommendation to buy or sell any commodity or its related securities. The author Barani Krishnan does not hold a position in the commodities and securities he writes about. He typically uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables.