In a recent analysis, Mobeen Tahir, Director of Research at WisdomTree, suggests that silver may be poised for a cyclical outperformance relative to gold. Tahir highlights the strong correlation between the two metals, indicating that gold’s ongoing rally bodes well for silver.
During March, silver exhibited a notable gain of approximately 8%, surpassing gold’s 7% increase. Despite this, silver’s year-to-date performance still lags behind gold, with gold up 6.1% and silver up 2.9%.
Tahir identifies several factors contributing to the potential for silver’s outperformance. Firstly, silver historically demonstrates a high correlation of nearly 0.92 with gold, suggesting that silver tends to follow gold’s lead with a slight delay. This pattern often results in silver catching up to and outperforming gold after a period of gold dominance.
Furthermore, Tahir notes that the gold-to-silver price ratio is currently around 89, well above the historic average of approximately 52. This indicates a potential opportunity for silver to narrow the gap in performance relative to both gold and silver.
Data credit: Kitco news
Additionally, improvements in investor sentiment towards silver, as evidenced by net speculative positioning in silver futures, suggest a growing interest in the metal. Tahir points out that increased speculative positioning has historically preceded strong rallies in silver prices.
Structural drivers also support silver’s potential outperformance, particularly in industrial applications such as electric vehicles and solar energy. The rise in sales of plug-in electric vehicles and global commitments to increase renewable energy capacity are expected to drive demand for silver in the energy transition sector.
Data credit: Kitco news
In addition to the aforementioned factors, Tahir underscores the significance of silver’s role in industrial applications, particularly within the energy transition sector. With the increasing adoption of electric vehicles and solar energy solutions worldwide, the demand for silver is expected to soar. Sales of plug-in electric vehicles have surged, indicating a robust market for metals like silver, which are essential components in electric vehicle batteries and solar panels. Moreover, recent commitments by world leaders to triple global renewable energy capacity by 2030 further reinforce the outlook for silver demand in the long term.
Furthermore, Tahir emphasizes that silver’s appeal extends beyond its industrial utility to encompass its status as a precious metal. As investors seek diversification and safe-haven assets amid economic uncertainties, silver presents an attractive investment opportunity. The metal’s correlation with gold, combined with the uptick in sentiment and strategic drivers, underscores its potential to deliver favorable returns. With silver gaining attention in trading sessions and exhibiting signs of upward momentum, investors are closely monitoring its performance to capitalize on potential opportunities in the market.
Conclusion
In conclusion, Mobeen Tahir’s analysis suggests silver may be on the brink of outperforming gold, backed by strong correlations, historical patterns, and promising industrial and investment prospects. With factors such as increased speculative interest and rising demand in energy transition applications, silver’s potential for growth appears robust. As investors navigate economic uncertainties, silver’s dual appeal as both an industrial commodity and a precious metal positions it favorably for potential returns. Monitoring silver’s performance closely could unveil lucrative opportunities in the market ahead.
