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Sideways silver prices prove the gold rally is sovereign-driven, but analysts say the big move is coming

Gold’s record-setting run-up in price has made many investors very happy over the last couple of weeks, with the yellow metal setting new all-time highs again and again as it climbed above $2,190 per ounce. But, one subset of precious metals investors are still waiting for their ship to come in.

To the surprise of many, even amid gold’s sustained strength, silver has yet to break out of its doldrums. The gray metal recently lost its place as the eighth-largest asset by market cap to Bitcoin, which has outperformed it even more dramatically than gold.

Nicky Shiels, metals strategist at MKS PAMP, is one of the sector experts left puzzled by silver’s relatively poor performance.

“The average Silver price on past Gold peak days is ~$28. Even more so, the average Gold/Silver ratio is $67.60 (22% below current levels),” she said in a recent X post. “In other words, at $2170 Gold prices, Silver should be over $32/oz! Just sayin’.”

Sean Lusk, co-director of commercial hedging at Walsh Trading, told Kitco News that the reason why silver is bucking its historical trend may be because, unlike those previous highs, the demand drivers for gold are narrow and unique to the yellow metal.

He said that the current gold rally is running on sovereign purchases. “A lot of central bank buying, not only by [China], but by others to prop up their currencies,” he said.

Lusk said the fact that gold demand is primarily physical rather than investment-driven, and governments rather than ETFs and hedge funds are the major buyers, limits the secondary effects that have historically benefited silver prices in gold’s wake.

Source: Ernest Hoffman Kitco