Macro

Silver Rally Hits 25% in 2024, Deficit and Demand Fuel Surge

Silver's 2024 rally outpaces gold with a quarter surge, driven by record industrial demand and looming deficits, spotlighting its dual appeal.

By Bill Bullington

5/16, 20:09 EDT
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Key Takeaway

  • Silver outperforms gold with a nearly 25% rally in 2024, driven by strong financial and industrial demand amid a forecasted second-highest deficit on record.
  • The gold-silver ratio has narrowed from above 90 in January to about 80, indicating silver's relative undervaluation and potential for further gains.
  • Declining LBMA-tracked silver stockpiles signal tightening supplies against robust demand, especially from the clean-energy sector, hinting at possible supply challenges ahead.

Silver Outshines Gold

Silver has experienced a remarkable rally in 2024, surging by almost a quarter and outperforming gold, making it one of the year's standout commodities. Despite its impressive gains, silver remains relatively inexpensive compared to gold, with the current ratio standing at about 80 ounces of silver to buy 1 ounce of gold, diverging from the 20-year average of 68. This disparity has caught the attention of investors, who see potential for a rebalancing of the gold-silver ratio, especially as both metals share similar macroeconomic and currency-hedging attributes.

Industrial and Financial Demand Fuels Silver

The surge in silver prices is not just a reflection of its financial asset status but also its industrial utility, particularly in clean-energy technologies like solar panels. The Silver Institute anticipates record usage of the metal this year, driven by robust growth in the solar industry. This dual demand has propelled the market into its fourth consecutive year of shortages, with 2024's deficit forecasted to be the second-largest on record. Such a scenario underscores silver's critical role in both financial portfolios and the industrial sector, highlighting its unique position in the commodities market.

Depleting Silver Stockpiles

The increased industrial demand for silver, coupled with its investment appeal, has led to significant withdrawals from the world's major silver inventories. Stockpiles tracked by the London Bullion Market Association (LBMA) have dwindled to near-record lows, with similar trends observed in New York and Shanghai exchanges. Analysts from TD Securities warn that at the current rate of demand, LBMA stockpiles could be exhausted within the next two years. This tightening supply scenario is raising concerns among dealers about future silver availability, pointing to a potential crunch in supply if industrial demand continues to rise and investor interest remains strong.

Street Views

  • Gregor Gregersen, Silver Bullion Pte (Bullish on silver):

    "Even clients who are interested in buying gold are starting to say ‘well, maybe I’ll buy silver first, and wait for the ratio to sort of rebalance’."

  • Daniel Ghali, TD Securities (Bullish on silver):

    "We are slowly going to see supplies tightening because industrial demand is set to go higher. If investors are also starting to buy, then I think in two or three months’ time, my biggest problem might end up being ‘Where do I find supply?’ rather than ‘How do I sell the silver?’"