Gold, which has repeatedly hit new highs this year, naturally deserves attention, but silver should not be ignored. Silver has outperformed gold so far this year and may be preparing to launch a strong rally, driving prices towards historic highs.

"Investors and consumers' enthusiasm for gold has now spread to silver," said Michael Cuggino, President and Fund Manager of the Permanent Portfolio Family of Funds. "With interest rates falling, global uncertainty, and a weakening US dollar as the macro background, both gold and silver are in a bullish environment," but he noted that silver's "current price movements may be more volatile."

On Monday, the December gold futures contract on the New York Mercantile Exchange hit a new intraday record high of $2,617.40 per ounce. Last Friday set a historic high settlement price of $2,610.70 per ounce, marking the 34th highest settlement price of the year. Dow Jones Market Data shows that as of Monday, gold prices have risen by 25.9% year-to-date.

Meanwhile, on Monday, December silver futures closed at $31.14 per ounce, well below the historical high settlement price of nearly $50 per ounce set in 2011. However, based on the most active contracts, silver prices have risen by 29.3% year-to-date.

"Gold has been in the spotlight this year, but silver has outperformed," wrote Hamad Hussain, Assistant Economist for Climate and Commodities at Capital Economics, in a report at the end of last week. "Some bullish factors that supported gold prices, such as the decline in US Treasury yields and a weaker dollar, have also provided support for silver in recent months."

Hussain stated: "In addition to demand from consumers and investors, silver is also used in the production of solar panels, which means industrial demand has played a key role in driving silver prices higher." He pointed out that in 2023, demand related to solar photovoltaics accounted for about 15% of total silver demand. Photovoltaic cells convert light energy into electrical energy.

According to the "2024 World Silver Survey" released by the Silver Institute and Metals Focus, the global silver market has a supply deficit of 0.1843 billion ounces. The report stated that this deficit has decreased by 30% from last year's "possibly record high deficit," but is still one of the largest deficits ever recorded.

Hussain suggested that since silver often rises in sync with gold, and Capital Economics believes that gold prices will rise by the end of next year, "silver prices may also strengthen." Looking ahead, he noted that a softening in industrial demand could limit the upside of silver prices. However, Cuggino from the Permanent Portfolio Family of Funds predicted that silver will continue to outperform gold as the silver price "has not yet taken off like gold."

Cuggino said that silver is currently in a significant medium-term uptrend. When asked what needs to happen for the price to rise to record highs, he said he has already seen these factors in the market.

The most active silver futures have not reached their historical highs in over 13 years. On April 25, 2011, the trading price reached a peak of $49.82.

"Combining the current monetary environment with the fact that silver is in short supply, you will find that the price approaching $30/ounce forms a very solid support, and the silver price may break through and stabilize in the $30/ounce range in the coming years," Cuggino said.

He said that economic activity is another factor to consider, and silver performs quite well during economic recessions. "Although economic downturns are unfavorable for industrial demand, the relative value of silver may counteract the price impact as the (Fed) lowers short-term interest rates compared to the decrease in real interest rates."

It is expected that the Federal Reserve will announce a rate cut on Wednesday, which may be the first in a series of rate cuts to boost the economy and prevent a recession. If you are a silver trader, "you may want to wait for the price to fall to around $25/ounce, but for long-term investors, given that silver may perform well in the long run, the current valuation is reasonable," Cuggino said.