05.05.202111:50 Forex Analysis & Reviews: Silver bypasses gold for 18 times

Usually, market participants focus their attention on the yellow metal, but this time, the favor is on the white one. Experts have recorded growth in silver's price 18 times faster than gold, and this is not the limit.

The growth rate of silver was 18 times higher than the rate of gold throughout the previous year. Analysts said that the price of gold has risen by 4.3% over the past 12 months, although its value declined by 6.5% at the beginning of 2021. In terms of silver, its price has risen by an impressive 78%, which is the best indicator among precious metals.

Since November 2020, investors have steadily reduced their investments in exchange-traded ETFs-funds focused on gold. As a result, the volume of gold investments fell to the level where it was a year ago. Thus, silver had the upper hand: over the year, investments in silver ETFs increased by a third. Silver took advantage of the chance, overtaking the plunging gold, and quickly took the lead.

At the moment, gold metal is losing positions, although it is still in demand among investors. The tense economic environment and political instability worsened the situation. On Wednesday, the yellow metal sharply dropped amid statements by Janet Yellen about the excessive "warming up" of the US economy and a possible rate hike in US interest. Last night, June gold futures declined by 0.9%, reporting to $ 1,776 an ounce. This morning, the leading precious metal was trading at $ 1,778 per ounce. According to analysts, J. Yellen had enough hints of the planned rise in interest rates for the gold market to immediately turn down.

The growth of investor interest in safe-haven assets kept gold at a high level, but it weakened later. Experts believe that the speech of J. Yellen yesterday has deprived gold of hope for growth. At the same time, the prices of gold and silver remain highly correlated, and silver has a more significant beta coefficient than gold. The interdependence of both precious metals is manifested in the fact that in the event of a fall in the gold's value, the dynamics of the silver price will be in the red zone. If at the same time, investors start to reduce their investments in "silver" ETFs, this will negatively affect the value of both metals.

Analysts believe that the demand for silver this year will surge to a six-year high, that is, to 257 million ounces. This is facilitated by the growing inflation and increased industrial use of gold. The Silver Institute estimates that global demand for silver will increase by 11% in 2021 to 1.025 billion ounces. The Silver Institute believes that the key driver of such growth will be the improvement of the macroeconomic indicators of the global economy. As for the forecast growth of industrial demand for silver, it will increase by 9% compared to 2020. Experts attribute this rise to the development of the 5G network in many countries of the world, for the creation of which up to 300 million ounces of silver were allocated. The white metal is also in demand in the production of solar panels: about 105 million ounces of silver are used in this industry, which corresponds to 10% of global demand.

According to a study by Heraeus Precious Metals, silver will show a better return in percentage terms than gold this year. The rise in silver prices is driven by factors such as inflation and industrial demand amid the global economic recovery after COVID-19. Analysts said that in 2021, the demand for silver from industrial consumers will increase to 510 million ounces. Most of all, white metal is in demand in the electronics sector and in the production of solar panels.

In terms of the global financial market, the main precious metals, in particular gold and silver, are highly profitable assets that protect the savings of investors. If inflation increases, the demand for silver as a safe haven asset will increase. Experts are confident that silverl will receive a strong impulse to continue the upward trend amid the general enthusiasm from the global economic recovery.