Gold is having its big moment right now – but silver is about to have another: Morning Brief

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Although gold is reaching record highs, silver is once again attracting attention from investors.

The price of the metal – both a precious metal and an industrial product – rose for four days in a row, exceeding the $31 per ounce mark for the first time since July.

While this week's 10% gain is already the best since the early pandemic days of August 2020 – and enough to secure a two-month high – investors likely have their sights set much higher.

There are several reasons why the second-place metal has potential. First, silver has slightly outperformed gold this year, but if you look at the so-called gold-silver ratio, the price of gold is still higher compared to silver on a historical basis.

When the gold to silver ratio hits 80, many investors will look for buying opportunities in silver, betting that the ratio will revert to its mean. It is currently at 84, but just a few weeks ago, when the price of gold was rising, it was above 90. According to Nicholas Colas of DataTrek, the historical average of the ratio since 1990 is 70, meaning that silver has room to move higher against gold over the long term.

Technical analysis of silver prices also reveals long-term pent-up upside potential, and the two looming highs in silver's history at around $50 per ounce could act as magnets for a breakout.

Silver prices rose sharply in 1980, shaking up the investing world, as Nelson Bunker Hunt, William Herbert Hunt and Lamar Hunt attempted to dominate the silver market. The Hunt brothers' market manipulation scheme boosted prices by 700% after they acquired about a third of the world's silver supplies.

The trade ended in tears for the brothers, but the price target was set.

After falling to three dollars in the 1990s, silver experienced a resurgence in the late 2000s, when the global financial crisis reached its peak.

In the midst of the boom years of QE 1 and 2, silver futures reached another high of almost $50 per ounce in April 2011 – an increase of almost 170 percent over the previous year.

Since that second spike to $50, the price has fallen again and has recovered in fits and starts since then. The pandemic sparked a rally in 2020 that took silver to $30, and this year it has surpassed the $32 mark.

According to Goldman Sachs, $32 is the key level for silver, which the bank says is “on the verge of a multi-month breakout.” The bank also noted that options on the iShares Silver Trust (SLV) had one of their busiest days in years last Friday.

The story continues

The bank noted that the Federal Reserve is on the verge of its first rate cut in years. But the real attraction may be growing demand for artificial intelligence, as silver is crucial for chip manufacturing. Silver investors will be closely watching chip demand developments this earnings season.

Another market narrative about Fed rates and AI.

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