Email of the day on silver's outperformance
Comment of the Day

September 15 2022

Commentary by Eoin Treacy

Email of the day on silver's outperformance

With the ongoing downdraught in gold prices, silver seems to be holding its ground very well. Could this be partly due to its industrial uses?

Eoin Treacy's view

Thank you for this question which may be of interest to other subscribers. There are a couple of important points to consider in understanding silver’s recent outperformance and not least because of the tendency of silver to outperform during the 2nd and 3rd stages of a secular bull in precious metals.

A lot of silver is produced as a by product of copper production. The weakness in copper is potentially at least a partial support for silver. The threat of work stoppages at BHP’s Escondido mine may have been a catalyst but that is a tenuous connection.

The continued relative strength of the solar and battery sectors is a potential rationale for some additional strength in silver even if they have been concentrating on reducing silver intensity for the last few years.

The other side of that argument is investment demand for silver, through ETF positions, is trending lower. 

The silver/gold ratio is back testing the sequence of lower rally highs. This is the point at which silver will turn to sustained outperformance or will experience the drag from gold breaking below $1700. My gut tells me silver is not going to prove immune from selling pressure in the wider gold market.

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