Why has silver outperformed gold
For several years, silver has always been overshadowed by the record-setting glow of gold, but this year, silver's price has risen by about 80%, while gold has risen by 55%. This means that the returns on investing in silver have even exceeded those of this more expensive precious metal. Should one choose to store assets in silver jewelry?
This year, silver's increase far exceeds that of gold. As of mid-October, the price of silver per ounce has broken through $52, rising nearly 80% from the beginning of the year; during the same period, gold's increase was 55%.
"Since the beginning of this year, the price of silver has increased by more than 80%, a level comparable to 2010 (an increase of 83.3%). Historically, silver prices have seen significant increases of over 40% in 2009-2010 and 2020," said Nikolai Duzhanko, an analyst at "Finam" Group (ФГ «Финам»).
Part of the reason for the rise in silver prices is similar to that of gold, including geopolitical and fiscal pressures faced by major economies such as the United States, France, and Japan, as well as inflation and currency depreciation. Investors are buying gold and silver to avoid risks associated with the US dollar, euro, and Japanese yen.
"At the same time, there is a unique reason for the rise in silver prices — the market is facing a shortage of silver. It is predicted that the silver deficit this year may reach around 800 million ounces," Duzhanko pointed out.
"Gold Capital" Company («Золотая плата») Vice President Alexei Viyazovskiy analyzed: "The core reason why silver has outperformed gold this year is that it was previously undervalued. For many years, investors focused on gold, which saw record high prices, while silver did not keep up. It was only this year that large investors began to enter the silver market, and their investment target was primarily silver bars. The silver market (by value) is only one-tenth of the gold market. Therefore, when a large amount of investment funds flow into the market like this year, the price fluctuations will be much greater than those of gold. This is also the key reason why silver could 'catch up and surpass' the increase this year."
The price trends of gold and silver usually tend to be consistent (but not absolutely), but these two metals have significant differences. Viyazovskiy explained: "Gold is like a 'premium asset', its core function is to preserve value. Central banks and large investors include gold as 'crisis reserve assets' in foreign exchange reserves, and ordinary people also buy gold to hedge against inflation and preserve wealth. Silver is more of an 'industrial metal', a truly 'practical metal'. Whether it's smartphones, computers, or televisions, they all cannot do without silver. In addition, the demand for silver in the green economy (such as solar panel manufacturing) and the medical industry is extremely strong."
"The industrial sector is the largest source of demand for silver. It is expected that by 2025, the demand for silver in the industrial sector will reach 677.4 million ounces, accounting for about 60% of total demand. At the same time, there has always been a correlation between the prices of gold and silver. Analysts often use the 'gold-silver price ratio' (the ratio of gold price to silver price) as a reference indicator. The average value of this ratio over the past few years has been approximately 77," Duzhanko said. Once this ratio shows abnormal fluctuations, it is worth paying close attention to the movement of silver prices.
India and China are the world's largest consumers of silver (and gold). These two countries not only have vast industrial systems and large populations, but also cultural customs where silver jewelry is passed down through generations as family assets, further increasing the demand for silver.
Viyazovskiy believes that there are still opportunities to invest in silver now, but silver jewelry, like other types of jewelry, is not a suitable investment item.
"All jewelry is essentially a customized product of jewelers, and the selling price can be 100%-200% higher than the value of the metal itself. This means that investors can only break even when the metal price rises by 100%-200%, and even this year, silver prices have not reached such a high increase. Moreover, if you want to resell the jewelry, the recovery price is usually only the price of scrap metal, and it is also 30% lower than the spot price at that time," he said.
Viyazovskiy emphasized: "Investment should choose standardized, large-volume products — these products have low premiums, small price spreads, and through centralized market trading, the prices are transparent, traceable, and convenient for investors to analyze the market situation. Specifically, you can invest in silver through stock exchanges (such as silver futures), banks (such as non-physical precious metal accounts), or the physical metal market."
Currently, silver futures can be traded on exchanges, and banks can open non-physical precious metal accounts (note that such accounts are not covered by deposit insurance). Investors can also participate in silver investment through ETF funds (exchange-traded funds, which purchase silver bars as reserve assets and issue corresponding fund shares for investors to trade). Finally, the investment targets in the physical silver market also include silver coins and silver bars.
Compared to gold, the investment threshold for silver is lower. Currently, a 3-gram "Victory George" coin (Георгия Победоносца) costs about 50,000 rubles, while a 31-gram silver coin costs only 5,000 rubles.
"I have always advocated investing in physical metal because I don't like to bear counterparty risk. From an investment perspective, silver coins have an advantage over silver bars — purchasing silver coins does not require paying value-added tax (НДС). However, silver is prone to oxidation and darkening, so it is best to store it in sealed capsules to avoid contact with air. Some customers use vacuum packaging machines to package silver coins to prevent oxidation," Viyazovskiy said.
But he also warned that if the precious metals market declines, the drop in silver prices may exceed that of gold. According to his prediction, the silver price may rise to $60-65 per ounce at the beginning of 2026, but he does not believe that silver can quickly rise to $100 per ounce, and instead, a correction may occur.
Original article: https://www.toutiao.com/article/7561758981392187944/
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