Analysts from Heraeus Precious Metals stated that while a potential economic recession in the U.S. will affect industrial demand for silver, much of the recent strength of this precious metal is expected to carry over into the new year, with silver prices expected to outperform gold in 2025.
In the (2025 Precious Metals Forecast), analysts indicated that if market conditions develop as expected, they believe that the returns of silver will once again exceed those of gold in 2025.
They pointed out: "This year, the price of silver has increased the most among all precious metals (up 26.82% as of the end of November). Earlier this year, the start of the global rate cut cycle has benefited both gold and silver. At the same time, the continued growth in solar photovoltaic demand and the strong rebound in potential demand from India have also supported the price of physical silver."
Analysts pointed out that the rise in the gold-silver ratio indicates that the value of silver relative to gold remains at historic lows. They stated: "In the later stages of a bull market, silver often outperforms gold; if the rise in silver causes the gold-silver ratio to fall back to 67, the 27-year average, it means that silver prices will reach $40 per ounce."
However, Heraeus warns that investors should not underestimate the risks of economic recession and its impact on demand. Analysts stated: "Earlier this year, the U.S. Treasury yield curve normalized after experiencing the longest inversion since 1980. This indicator has a very accurate historical record in predicting that the U.S. economy will fall into recession within the next 6-12 months. Although several sectors of the U.S. economy, including the stock market, show relative strength, the yield curve suggests that the U.S. may enter recession in the second quarter of 2025."
They pointed out: "In a recession, silver often performs worse than gold. If industrial activity contracts as a result, then apart from electrical and electronic products and solar photovoltaic demand, industrial silver demand may see almost no growth."
Heraeus warns that demand for silverware and jewelry in India may decline next year. They wrote: "The historical cycle of India's silver imports suggests that 2025 could be a weak year."
On the other hand, solar demand is expected to continue its recent strong momentum by 2025.
Analysts stated: "The strong demand for silver from the solar industry, especially in China, is one of the main drivers of silver's total demand growth in recent years. It is expected that the demand for silver from solar energy will remain strong next year, as more countries move towards gigawatt-level installed capacity. Greater deployment of Topcon cells with higher silver content per watt will also support silver demand."
Heraeus expects that silver spot prices will fluctuate between $28 and $40 per ounce in 2025.
Analysts state: "Driven by the continued expansion of solar photovoltaic demand, industrial demand is expected to grow by 2025. Given the risk of an economic recession in the U.S., the Federal Reserve may continue to lower interest rates, which could weaken the dollar and thus support the prices of gold and silver."
They concluded: "As a metal with a higher beta coefficient, silver's relative performance is expected to exceed that of gold."
Article forwarded from: Jin Shi Data