As Gold Prices Reach New Highs, Silver Market Gains Attention
As gold prices continue to reach new highs, the silver market is also beginning to attract attention. Otavio Costa, a macro strategist at hedge fund Crescat Capital, stated that silver may be entering a super cycle and is expected to challenge the historical high of $50 per ounce set in 2011. Costa pointed out in an interview with Benzinga that silver is catching up to gold. He believes that silver’s long-term relative underperformance is about to reverse, particularly as the current market environment resembles past prosperous cycles, suggesting that a new bull market may have already begun. This is purely market observation and not investment advice.
Surging Demand in the Solar Market Drives Up Silver Prices
Since early June, silver prices have risen by more than 10%, reaching $36.80 on Monday, marking a new high since 2012. The current price stands at $36.42, with a year-over-year increase of approximately 24.8%. Costa believes that silver is at a critical turning point, not only due to the supply side lacking new mine discoveries but also because the demand side is experiencing structural changes driven by the rise of the green energy industry.
Costa indicated that the demand for solar panels is growing rapidly, currently accounting for 15% to 17% of global silver demand, a significant increase from single digits a few years ago, reflecting the impact of energy transition on the silver market.
Opportunity for Silver Price Reversal and Upsurge
Costa specifically pointed out that the difference in the gold-silver price ratio is expected to provide an opportunity for silver to reverse and rise. Currently, silver is trading at a hundred times the price of gold per ounce, with analysts predicting more upside potential for silver. Costa noted that silver prices are likely to experience a sharp rebound.
Costa believes that silver is transitioning from being purely an industrial metal to becoming a monetary asset, similar to gold’s role as a safe-haven asset. Once prices start to rise, silver will no longer be seen merely as an industrial metal but will transform into a monetary metal.
Key Threshold at $50
The next important technical resistance level for silver prices is at $50, a benchmark that was reached during the Hunt Brothers market manipulation events in 2011 and 1979 (Note 1). Costa emphasized that once this threshold is breached, silver will enter a “price discovery phase,” making subsequent price increases difficult to predict. He stated that crossing the $50 mark will lead to a completely new price range.
Chinese Buyers Pay Premium for Physical Silver
Costa pointed out unusual signs in the physical silver market. Over the past 6 to 12 months, Chinese buyers have been willing to pay a premium of $1 to $3 per ounce to acquire silver concentrates. This physical premium is starting to reflect in futures prices, indicating that the supply-demand imbalance in the market is intensifying.
Crescat Capital owns the world’s largest silver mine, San Cristobal, and its investment direction for silver is closely watched by the market.
Note 1: The Silver Thursday of 1979
Between 1979 and 1980, Texas oil tycoons the Hunt Brothers attempted to corner the silver market through massive purchases of physical silver and futures contracts, causing silver prices to soar from $6 per ounce to nearly $50. This frenzy raised the alarm for regulatory authorities, and ultimately in March 1980, due to failed margin calls, prices collapsed by over 50%. This event, known as “Silver Thursday,” shocked global financial markets and prompted the United States to strengthen its regulatory framework for commodity markets.
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