Silver will outperform gold as industrial demand picks up - BMO

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(Kitco News) - Precious metals prices will see headwinds in the medium term, but a recovery in industrial demand and a burgeoning solar sector should see the gold:silver ratio move closer to its historical average in the coming years, according to Colin Hamilton, commodities analyst at BMO Capital Markets.

Speaking in the latest Metal Matters podcast, Hamilton said that the near-term prospects for silver are being driven by “macro asset allocator positioning, the FED and the USD.” He noted that “silver has had a pretty tumultuous time over the past month,” with the price hitting highs above $25 per ounce before pulling back.

Hamilton noted recent comments from Federal Reserve Chair Jerome Powell that strong economic data, while positive, could make reaching their 2% inflation target more challenging and could require further rate hikes. He said this has strengthened the U.S. dollar and created “broad selling pressure” on precious metals.

He believes that investors’ risk appetite will increase through 2024 as markets become convinced that the worst economic news is behind them and as the Fed’s interest rate direction becomes clearer. “[W]e might see a little bit more money flow out of the precious complex – perhaps out of silver sooner than gold, but eventually we see gold ultimately falling further,” he said.

“In 2021-22, silver industrial fabrication hit successive record highs, with volumes in 2022 16% higher than the 2010 total,” wrote analysts at Metals Focus in a recent report.

 

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