Silver could outperform gold again next year, spot price forecast to hit $40/oz in 2025 – Heraeus
Silver could outperform gold again next year, spot price forecast to hit $40/oz in 2025 – Heraeus
By Ernest Hoffman
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(Kitco News) – While a likely U.S. recession in Q2 would impact industrial demand for silver, most of the gray metal’s recent strengths are expected to carry over into the new year, and the price of silver is projected to outperform gold in 2025, according to analysts at Heraeus Precious Metals.
In their Precious Forecast 2025, the analysts said that if market conditions unfold as expected, they believe silver will outgain gold once again in 2025.
“This year, the silver price has seen the largest percentage gains across the precious metals (+26.82% to the end of November),” they noted. “The beginning of the next phase of the global interest rate cycle earlier in the year has helped both gold and silver. Meanwhile, relentless growth in solar photovoltaic demand and a strong rebound in implied demand from India have also supported the price on the physical side.”
The analysts pointed out that the elevated gold:silver ratio suggests that silver is still historically undervalued relative to gold despite this year’s sector-leading rally. “Silver tends to outperform gold in the later stages of bull markets, and a reversion to the 27-year mean ratio of 67 as a result of a rally in silver implies a price of $40/oz,” they said.
Heraeus warned, however, that investors should not discount the risk of recession and its impact on demand. “Earlier this year, the US yield curve uninverted following the longest period of inversion since 1980,” the analysts said. “This indicator has a very strong track record for signalling a US recession in the following 6-12 months. Although a number of areas in the US economy are showing relative strength, including the stock market, according to the yield curve, the US could be in recession by Q2’25.”
“Silver tends to underperform gold in recessions,” they noted. “If industrial activity were to contract as a result, it is possible there could be little growth in industrial silver demand, outside electrics and electronics, and solar photovoltaic demand specifically.”
Regarding silverware and jewellery, Heraeus cautioned that Indian demand in these areas could decline next year.
“India, the largest market for silverware and jewellery fabrication demand, has seen a surge in silver imports this year, as jewellers and fabricators restocked after a softer 2023,” they wrote. “An import duty cut in mid-2024 prompted higher consumption as the landed price of silver fell. The historical cyclicity of India’s silver imports suggests that 2025 could be a weaker year, and a rise in the silver price above the pre-duty cut level may also discourage some purchases as the psychological incentive fades.”
Solar demand, on the other hand, is expected to continue building on its recent strength in 2025.
“The solar sector’s flourishing demand for silver, particularly in China, has been one of the main drivers of total silver demand growth in recent years,” the analysts said. “China is on track to match 2023’s record-breaking installations, and overcapacity in Chinese PV manufacturing means there is no demand-side restriction on installations on the horizon. Solar demand for silver is expected to continue to be strong next year, and it is not just in China. An increasing number of countries are moving towards gigawatt-scale installed capacity. Greater deployment of TopCon-type cells with a higher silver loading per watt will also support silver demand, which is likely to rise again in 2025.”
Recycling is another area where Heraeus expects to see increases in the coming year. “Historically, the rate of silver scrappage and recycling has correlated very well with the silver price,” they wrote. “This year, the volume of recycling is expected to reach a 12-year high. As the price rises, more silver in various applications becomes economic to extract and recycle. It is estimated that this will be maintained in 2025 as the price holds above $28/oz.”
They also noted that several new mines and restarts of existing mines are scheduled to begin production next year, “which could add ~10 moz to primary supply, equal to ~1.2% growth versus 2024 forecast production.”
“Most mined silver comes as a by-product from copper, lead and zinc mines,” they added. “Production of all three commodities is predicted to increase year-on-year in 2025 and is likely to add to mined silver supply.”
Heraeus forecasts the spot price of silver to trade between $28 and $40 per ounce in 2025.
“Industrial demand is expected to grow in 2025, driven by a continuous expansion of solar PV demand,” the analysts said. “With the risk of a recession in the US, the Fed is likely to keep lowering interest rates, potentially weakening the dollar which should support the silver price, alongside gold.”
“As the higher beta metal, silver is expected to outperform gold on a relative basis,” they concluded.
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