Silver remains at bargain prices despite surging more than 30% in 2024. Commerzbank analysts emphasize the shiny metal’s relatively affordable price compared to gold. This undervaluation, in tandem with a bullish 2025 outlook, presents investors with a potentially valuable yet time-limited entry point.
Silver is On Sale!
Silver is one of the highest-yielding assets of 2024, outshining gold and the stock market. When measured trough to peak, the shiny metal rose more than 57%. Even following a post-election slump, silver still clings to nearly 30% gains on the year.
As investors mull over investing in gold or silver for next year, Commerzbank is signaling silver’s undervalued position. The banking giant points to two primary factors underlying its stance: the gold-to-silver ratio and silver’s projected growth.
Gold-to-Silver Ratio
The gold-to-silver ratio simply measures how many ounces of silver are required to buy one ounce of gold. This widely used metric is used to calculate the relative value of silver to the yellow metal. When the ratio rises above 80:1, silver is generally considered cheap. Currently, the ratio stands at 85:1, indicating discounted silver prices. For reference, this measurement has bounced between 50:1 and 70:1 for most of the 21st century. Extreme deviations usually indicate serious economic declines.
Silver Price Predictions
Commerzbank also cites healthy price forecasts to indicate silver’s undervalued position. After charting several relative highs throughout 2024, the average silver outlook remains bullish.
Many 2025 silver price predictions have silver topping $35 and even $40, representing 16% and 33% gains from current levels, respectively. Commerzbank set a target of $32 at the beginning of the year and $33 by the end. In other words, the bank’s research team sees prices surging roughly 10% over the next year.
Key Drivers of Silver’s Future Gains
Interest Rate Cuts
The Federal Reserve’s monetary easing policies are creating firm soil for silver prices to sprout to new highs. The Commerzbank report indicates that “silver is being supported by the interest rate cuts already implemented and the prospect of further cuts by central banks.” Generally, lower rates encourage investors to leave dollar-backed assets as potential yields diminish. Safe-haven assets such as gold and silver tend to be the beneficiaries of this exodus as investors look for more stable and protective investments.
Growing Industrial Demand
Industrial demand is on track for a 7% surge in 2024 as one of the heaviest contributors to global silver consumption which is expected to hit the second-highest level ever at 1.21 billion. Commerzbank anticipates heightened industrial demand in 2025, especially from the rapidly growing renewable energy sector. This increased application for silver, driven by its unique properties, is anticipated to elevate silver prices throughout 2025 as supply struggles to keep pace with ballooning renewable demand.
Steep Supply Deficits
The silver supply is projected to enter another massive deficit in 2025, an alarming trend it’s maintained for the past 14 years. Silver production has struggled to keep up with consumption for various reasons including outsized demand, expensive mining operations, and supply chain challenges. This stagnant supply, combined with booming industrial demand, means more buyers are outbidding for fewer resources. The resulting supply-demand tension usually makes for bullish silver prices.
Gold has the momentum to clear more all-time highs in 2025, according to Macquarie Group Ltd. The Australian-based multinational bank upped its projection for the yellow metal to $2,800 in mid-2025 with the potential for reaching $3,000 by year’s end. In a note to investors, analysts forecasted possible drivers and headwinds facing gold next year, highlighting the climate of economic uncertainty.