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Why silver is outperforming gold

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Silver has sharply outpaced gold’s gains in the past three months, and its classification as both an industrial and precious metal may lead it on a path to even higher prices.

From Oct. 31 to Jan. 31, Comex silver futures

climbed nearly 25%, outpacing gold’s

almost 19% climb, a “statistically unusual amount that shows the precious metals market is bullish on global economic growth in 2023,” wrote Nicholas Colas, co-founder of DataTrek Research, in a Jan. 25 report.

He pointed out that silver is primarily an industrial metal, while gold is used mainly as an investment and for jewelry, so the better performance for silver prices supports the idea that the “global economy is in better shape than feared in mid-2022.” Colas attributes that primarily to the reopening of China’s economy after lifting Covid restrictions and said that is “shaping up as a central investment theme” for the first months of this year.

Read: China’s recovery is key to the 2023 outlook for industrial metals and more

Much of the hype over China’s economic reopening centered on oil and prospects for higher energy demand, temporarily lifting crude to its highest prices since November.

Read: Foreign investors flock back to Chinese stocks now that the economy is reopening after the lifting of COVID restrictions

Many industrial metals have also gained as Covid restrictions on business activity have eased in China, the world’s biggest metals consumer. Copper and iron-ore futures on Comex each climbed by nearly 11% in January.

Read: What’s behind copper’s impressive rise?

Silver’s outperformance over gold in the past three months is “primarily due to real or perceived future demand for silver due to industrial usage factors such as the reopening of China and other slowly awakening economies, supply constraints, and expected increase in overall demand,” says Michael Cuggino, president and portfolio manager of the Permanent Portfolio Family of Funds.

But that’s not the whole story.

The demand increase for silver is expected to come from not only conventional industrial needs, such as construction and technology, but also from the global push toward clean-energy production and related goods such as electric vehicles, says Cuggino.

Michael Gayed, portfolio manager of the ATAC Fund Family and publisher of the Lead-Lag Report, points out that there’s also a “broader risk-on sentiment taking place globally as emerging markets outperform, U.S. discretionary stocks lead, and domestic commodity plays like lumber surge on growth expectations and a housing pickup.”

Given all that, the move up for industrial metals so far this year is only partly attributable to China’s recovery, he says.

Silver’s value as a precious metal is also likely to support prices. Comex silver futures settled at $23.609 an ounce on Feb. 1.

Keith Weiner, founder and CEO of Monetary Metals, views silver as mostly a monetary rather than industrial metal.

He believes that silver’s price correlates with gold’s better than with copper—and gold and silver are “telling a story of monetary decline.” The path of silver is higher because the U.S. dollar will continue to lose value, says Weiner. The prices of monetary metals—gold and silver—are “inverse to the dollar.”

Over the past three months, both gold and silver gained while the ICE U.S. Dollar index, a benchmark for the international value of the dollar, lost over 8%.

If China’s economy continues to recover and there isn’t a global recession or a significant one in the U.S. or Europe, Cuggino says that supply-and-demand factors could be a “tailwind to commodity prices.” Monetary policy may also become a tailwind, he says. The Federal Reserve on Wednesday delivered a quarter-point interest-rate hike after a half-point hike in December.

With the right mix of factors, silver could go a lot higher, “easily into the $30s,” Cuggino says, but also “back down to the teens if a significant global or U.S. recession occurs.”


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