The gold price is currently a hot topic. But silver is also attracting attention with almost daily gains. It is even starting to outperform gold and surpass its “big brother”. While gold has seen a price increase of around 100% since the beginning of 2024, silver has reported a price gain of 121%, clearly leaving gold behind.
However, silver outperforming gold and clearly overshadowing it is not uncommon for the precious metals markets. Such developments are observed regularly. But, and this is the significant difference from the current situation: these stronger increases in silver were historically seen only at the end of a precious metals bull market.
This inevitably raises the question of whether the boom in gold and silver, which most Western investors have more or less overlooked and are only now noticing, is already nearing its end. Silver’s rapid ascent somewhat suggests this. However, such a development would also mean that a bull market concludes even before the majority of investors have fully recognized its existence and implications.
Can a Bull Market Truly Go almost Unnoticed by Western Investors?
However, this assumption is contradicted by the fact that the percentage of precious metals – whether physical or indirectly through gold and silver mining investments – currently held in investor portfolios is still exceptionally low. At around 1%, it is significantly below the peak of previous upward movements, during which it typically rose to 4%.
Furthermore, persistent geopolitical risks, unabated massive gold purchases by central banks, and increasing investor uncertainty regarding the global safety of government bonds also argue against an early end to the gold rally.
If one wishes to particularly avoid the last-mentioned risk, every investor inevitably faces the question of where to allocate their capital. This is a difficult question to answer, as equity markets are not even half the size of global bond markets, and within bond markets, confidence has been shaken not only in the bonds of individual states.
Global Loss of Confidence Continues to Favor Gold and Silver
Not only Western countries are massively over-indebted; Japan and China are as well. And since the entire world cannot flee into government bonds from Norway or Switzerland, there is no alternative to gold for the foreseeable future. Silver is only an alternative in principle at this point, as the silver market is considerably smaller than the gold market. It, too, cannot absorb the vast sums of money currently seeking protection and security.
Additionally, unlike gold, silver is significantly consumed in industrial applications. In recent years, silver has therefore at times even been denied its character as a precious metal and, consequently, its status as a monetary metal. While this rightly emphasized the growing importance of silver as an industrial metal, it simultaneously overstated the case regarding silver’s monetary function.
Silver is both a metal desperately needed by industry and a precious metal that has repeatedly and impressively proven its ability to store value permanently throughout history. Assuming that the majority of investors continue to attribute this function to silver, similar to gold, there is even a possibility that industry and investors will fundamentally compete for the metal in the coming months and years.
The Silver Institute Speaks of a Persistent, Structural Deficit that Will not be Easy to Resolve
It is obvious that this competition will primarily be fought over price. The
The Silver Institute therefore views the silver market as one that will remain very tight in the coming years. This pressure is likely to impact prices, tending to support them or drive them higher. However, this does not constitute a free pass for an eternal bull market.
While it is understandable why claims are currently being made in various internet forums that the silver price can no longer correct, every investor should also be aware that eternal, correction-free increases in financial markets will always remain mere wishful thinking.
Therefore, a Consolidation Will Occur Sooner or Later for both Gold and Silver.
When and at what price level it will begin, only time will tell, as both gold and silver have surpassed their all-time highs. Consequently, there are no longer any immediate technical chart resistances that could temporarily or even completely halt an ascent.
In the past, corrections in gold, and even more so in silver, were highly volatile affairs. Will this also hold true for the future? This possibility undoubtedly exists. However, against the backdrop of the structural deficit in the silver market, one should also consider the possibility that buyers will be compelled to re-enter the market very early to avoid being without the silver they require.
Therefore, various forms of consolidation are conceivable, ranging from wild price fluctuations to a tenacious, months-long sideways movement at a high level. As always, we will only know which variant the market chooses in hindsight.
Whether the gold market, and particularly the silver market, will be good markets for trading in the coming weeks and months remains to be seen. However, finding favorable exit points at attractive price levels might be significantly easier for investors than executing a good re-entry later on.
