Silver hits 14-year highs on the back of gold

Silver is at 14-year highs, having appreciated more than gold since the beginning of the year, up 35% compared to gold's 28%. Since June alone, silver has soared 18%, driven by several factors that have increased strong demand on the London Metals Exchange. According to XTB, "record highs in gold and growing uncertainty surrounding international trade are driving capital flows into safe-haven assets."

While gold remains the leading safe-haven asset, its appreciation (around $3,350 per ounce) is prompting a migration of investors to silver, which "remains substantially undervalued in relative historical terms." The gold/silver ratio is at levels not typical of bull market cycles, and historically, in times of greater economic and geopolitical stress, silver tends to lag behind gold, but it often experiences impulsive moves at the end of these cycles, as demonstrated in the 1979-1980 and 2010-2011 episodes. Silver's current recovery has been largely supported by institutional investors.

In addition to being a safe haven asset, silver has "strong industrial utility," especially in the solar PV sector. The growth of China's solar industry is a structural factor supporting long-term silver demand.

XTB also highlights the associated risks, such as the possibility of a "generalized increase in risk appetite," which could penalize precious metals. However, current trade tensions, particularly surrounding US tariffs, and the volatile geopolitical environment continue to fuel demand for assets uncorrelated with equity markets.

In the current scenario, the outlook for silver “remains constructive,” and the recent appreciation may not represent an exhaustion point, but rather an intermediate phase of a broader cycle, supported by solid fundamentals on both the financial and industrial sides.

Furthermore, the current monetary policy framework significantly limits the authorities' ability to respond. Unlike the early 1980s, when the Federal Reserve, under Paul Volcker, raised interest rates to 20% to curb inflation, such a scenario is currently unfeasible, given the high US public debt (US$34 trillion). A move of this magnitude could jeopardize US fiscal sustainability, making it more likely that accommodative policies or indirect monetary financing will continue, which would have a depreciative impact on the dollar, concludes XTB.