From Silver’s Golden Outlook to Gold’s Price Pressures

• MoneyMetals: The Curious Case of Languishing Silver Prices
• VanEck: Silver’s Golden Outlook
• Economics Observatory: Is Gold a Safe Haven for Investors
• Kitco News: It’s not Easy Being Gold

Here is our summary of the latest news of interest on precious metals in February.
Image: Umicore

MoneyMetals: The Curious Case of Languishing Silver Prices

Silver, a precious metal, has puzzled analysts with its stagnant price despite a growing supply deficit, according to MoneyMetals. While demand surges, especially in the green technology sector, production costs soar and mine output dwindles. This mismatch between dwindling supply and rising demand suggests a potential price increase in the future.

Key points:

• Silver demand: Up significantly since 2020, creating a deficit between supply and demand.
• Silver production: Falling due to rising costs (up 57% year-over-year) and declining mine output.
• Silver price: Stuck in a range since early 2020, despite the growing deficit.
• Silver inventories: Declining, raising concerns about accuracy of reported data.

Analysts believe that if the deficit persists, the silver price will eventually rise to incentivize new production and potentially dampen demand. However, questions remain regarding the accuracy of reported inventory data, adding another layer of complexity to the situation.

Summary by Jalonom based on the original article.
Originally published in MoneyMetals by Clint Siegner, 19 Feb 2024

VanEck: Silver’s Golden Outlook

Gold entered 2024 with a whimper, trading sideways as the Fed’s interest rate plans remained unclear. While demand from central banks remains strong, investor interest continues to wane, pushing gold stocks lower despite promising long-term trends.

Silver, on the other hand, may see its fortunes change. This undervalued metal, often overshadowed by gold, boasts strong industrial applications, particularly in solar panels. As the solar energy sector booms, silver demand is expected to surpass current supply, potentially leading to a price increase.

Key takeaways:

• Gold: Price held back by uncertainty around Fed rate hikes.
• Gold stocks: Underperformed gold due to disappointing earnings reports.
• Silver: Poised for potential price increase due to growing demand from the solar industry.

Analysts believe that while gold faces headwinds in the near term, silver’s industrial uses and potential supply shortage paint a brighter picture for its future.

Summary by Jalonom based on the original article.
Originally published in VanEck by Imaru Casanova, 19 Feb 2024

Economics Observatory: Is Gold a Safe Haven for Investors

Gold’s value is often touted as a safe haven for investors, but the reality is more nuanced. While it offers some protection against inflation and uncertainty, its performance is not guaranteed in all situations.

Gold’s strengths:

• Stable value: Historically, gold has held its value well, offering a hedge against inflation.
• Diversification: Adding gold to a portfolio can diversify and potentially reduce overall risk.
• Safe haven: During crises and economic turmoil, gold prices often rise as investors seek safety.

Gold’s limitations:

• Underperformance: Compared to stocks, gold generally delivers lower returns over the long term.
• Uncertain inflation hedge: While it can offer some protection against inflation, gold’s performance is not always consistent.
• Government intervention: During times of crisis, governments may intervene in gold markets, impacting its price.

Gold and the gold standard:

The gold standard, where currencies were directly linked to gold, was not a foolproof solution. It lacked strong international leadership and coordination, and its collapse in the 1930s sent shockwaves through the financial system. Moreover, government intervention in gold markets during this period raises concerns.

Conclusion:

Gold offers some benefits for investors, but it’s not a silver bullet. Its performance depends on various factors, and it’s crucial to understand its limitations before investing. Diversification and a long-term perspective remain key for investors navigating market uncertainties.

Summary by Jalonom based on the original article.
Originally published by Philip Fliers in Economics Observatory, 26 Feb 2024

Kitco News: It’s not Easy Being Gold

Gold prices are stuck, offering little excitement for investors. While they outperform a struggling gold mining sector, they pale in comparison to the tech industry’s dazzling performance.

Challenges for gold:

• Tech’s allure: Advancements in Artificial Intelligence are driving tech stocks like Nvidia to record highs, attracting investor interest away from gold.
• Bitcoin competition: The ongoing debate positions Bitcoin as a possible alternative to gold in investment portfolios.
• Federal Reserve policy: Continued reluctance to cut interest rates and potential for a recession further sideline gold.

Reasons for optimism:

• Central bank buying: Central banks, particularly in emerging markets, are steadily buying gold, seeking diversification and a hedge against inflation.
• Long-term potential: Some analysts view gold as a long-term hedge against future economic uncertainties, even if it lacks immediate shine.

The takeaway from the articles:

The current market landscape presents challenges for gold investors. While it faces competition from other assets, gold’s long-term value and central bank support suggest it still has a place in a diversified portfolio.

Summary by Jalonom based on the original article.
Originally published by Neil Christensen in Kitco News, 26 Feb 2024