What Is Happening with Gold & Silver Is Truly Remarkable

May 29, 2024

The surge in demand has not come from individual retail investors; gold-focused exchange-traded funds have seen net outflows of investment over the past three years.

The big buyers have been central banksters, grabbing about 2,200 tons, valued at around $170 billion at current prices, since the third quarter of 2022, according to the World Gold Council (WGC)…

Central banks account for more than 20 percent of global demand for the metal, the council said. In particular, six central banks—China, India, and Turkey most prominent among them—account for all of the net additions since mid-2022, WGC data shows.

China has bought 10 million ounces since November 2022, boosting its gold pile by 16 percent. China now holds about 5 percent of its asset reserves as gold, compared to 3 percent in 2022.

The splurge by financial authorities was sparked by Western sanctions on Russian assets after Russia attacked Ukraine. About $300 billion in Russian assets stored abroad remain frozen and there has been talk of seizing those assets to fund Ukraine’s defense or to rebuild the country.

“We think gold can continue to make new highs,” states UBS’s Precious Metals Strategist Joni Teves.

“Silver has been arguably even more interesting—finally it managed to enjoy some decent catch up with gold,” Nikos Kavalis, managing director at precious metals research consultancy Metals Focus, told CNBC via email. He elaborated that as the market gets more comfortable and convinced of gold’s bullish run, more of these investors are turning to silver.

Silver rallied past $31 per ounce to over a decade high last Wednesday amid surging investor interest and supply challenges. It is currently trading at $31.6 per ounce.

“We think [silver is] actually the best-placed precious metal to really benefit from higher gold prices. There’s a very strong correlation there,” said Teves.

She added that when the Fed eases, silver is in a “good position to really outperform gold,” especially as supply and demand fundamentals remain tight.

“Slower mine production growth and strong industrial demand suggest supply is lagging demand, which will keep the market in a structural deficit,” said Daniel Hynes, senior commodity strategist at ANZ.

Silver is used extensively for industrial purposes and commonly incorporated in the manufacturing of automobiles, solar panels, jewelry and electronics.

Metal Focus’s Kavalis said that other precious metals like platinum, palladium and rhodium are all in deficits this year, and hence should see supportive prices.