Spot silver jumped 11.9% this week, surpassing $30 an ounce and reaching its highest level in over a decade. The precious metal gained 6.5% to close Friday’s session at $31.49 an ounce, the highest since February 2013. This marks a remarkable 32% increase for silver this year, making it one of the best-performing major commodities of 2024, outpacing even gold.
Silver’s impressive rally is driven by a surge in investor interest, favorable macroeconomic conditions, and a projected fourth consecutive annual market deficit, as reported by Bloomberg. The price surge accelerated on Friday, fueled by positive sentiment across the broader metals markets.
“This week was kind of the recreation of the meme stock,” remarked Phil Streible, chief market strategist at Blue Line Futures, in a phone interview on Friday. “Speculators naturally look for different areas to exploit, and silver is usually one of their favorites.”
REDDIT TRADERS
Silver previously became a target for Reddit retail traders in 2021 during the buying frenzy involving GameStop Corp. and other small-cap stocks, events that captured the financial world’s attention. The metal’s recent break through the $30 level might trigger substantial buying activity by exchange-traded funds (ETFs), increasing the risk of a “silver squeeze,” according to TD Securities senior commodity strategist Daniel Ghali.
Despite the rally, investors have been net sellers of physically backed silver ETFs, with holdings down 1.7% as of Thursday, Bloomberg data shows. However, in the week ending May 14, money managers increased their bullish bets on Comex silver futures to the highest level in over two years, with gross shorts held by these investors accounting for 11% of total open interest.
Though silver’s performance has outpaced gold’s, it remains relatively affordable. Both metals often move in tandem due to their similar macroeconomic and currency-hedging properties. As gold hit record highs driven by central bank purchases, retail interest in China, and renewed expectations of lower U.S. interest rates, silver has mirrored these trends.
While interest in silver-backed ETFs has been limited, physical sales have surged. Singapore-based dealer Silver Bullion Pte reported increased sales, reflecting growing demand for the metal. Silver’s dual role as both a financial asset and an industrial input, particularly in clean-energy technologies, underpins this demand. The metal is crucial for solar panel production, an industry experiencing robust growth. The Silver Institute predicts that usage of the metal will reach a record high this year.
Amidst these dynamics, the silver market is poised for its fourth consecutive year of deficit, with this year’s shortage anticipated to be the second largest on record. This ongoing shortfall highlights the increasing pressure on silver supplies and reinforces its bullish outlook in the current market environment.
