Breaking $70! Silver Soars 140% Crushing Gold, What are the Investment Opportunities in Silver Mining Stocks?

Due to the dual impact of economic pressures and political tensions with GEO Group Inc, the prices of gold and silver both reached new highs in December. On Tuesday, the price of gold soared to a historic high of 4499.94 yuan per ounce, an increase of over 71% compared to the same period last year. However, the increase in the price of silver was even stronger, with a rise exceeding that of gold since the beginning of the year. On Tuesday, the price of silver broke through the $70 mark, rising by about 140% since the beginning of the year, also setting a new high for this precious metal. Experts suggest that this may be related to the unique relationship between these two metals. Steven Orrell, Vice President and Portfolio Manager of Orrell Capital Management and OCM Gold Fund, stated, "Historical data shows that during bull markets for precious metals, the price of silver typically lags behind gold, followed by a significant increase, as we are seeing now. In the past five years, silver performance has consistently lagged behind gold until last month's significant surge. Considering the historic performance of gold this year, the close connection between silver and gold as precious metals is undoubtedly an important factor driving its price increase." Why is the increase in the price of silver greater than that of gold? Although the prices of gold and silver are both skyrocketing, the performance of silver far exceeds that of gold. The gold-silver ratio (the price of one ounce of gold being equal to how many ounces of silver) has significantly narrowed the gap between the two. In April of this year, this ratio was 104:1, and it has now decreased to 64:1. Experts believe that there are multiple reasons why the price of silver has risen more than gold. Orrell stated, "From an investment perspective, with rising inflation expectations, more people may be purchasing silver alongside holding gold. Silver is also known as the 'poor man's gold' because it is a more cost-effective way to invest in precious metals while obtaining more physical metal, despite significant differences in price and scarcity compared to gold. With interest rates being cut, investors may also view silver as a way to participate in industrial investments, as they anticipate companies being able to finance more projects requiring silver's conductivity." Silver is an excellent conductor of electricity and is widely used in areas such as circuit boards, switches, electric vehicles, and batteries. Silver is a key component of CECEP Solar Energy's solar panels, and it is also used in coatings for medical instruments. The sustained high price of silver could weaken the profitability of industrial users and prompt people to seek alternative metals to replace silver components. Furthermore, like gold, silver is still a popular material for making jewelry and coins. China and India remain the major buyers of silver, benefiting from their large industrial bases, large populations, and the important role played by silver jewelry as a means of storing value through generations. Additionally, governments and mints in various countries also consume large amounts of silver to produce gold and silver coins and other products. Silver is slightly different from gold in that it has both investment and industrial uses, such as in electronics and CECEP Solar Energy's solar panels, making the volatility of silver prices potentially greater than that of gold. In addition, the liquidity of silver is lower than that of gold, meaning that gold is more easily converted into cash. Because silver has a wide range of uses, its market price is influenced by various factors, including changes in the manufacturing industry cycle, fluctuations in interest rates, and even renewable energy policies. Industrial demand for silver often rises when the global economy accelerates. In times of economic downturn, investors may intervene as alternative buyers. The silver market is less liquid than the gold market. Daily trading volumes are smaller, inventories are tighter, and liquidity can quickly evaporate. The value of silver stored in London is slightly less than $50 billion, while the value of gold is as high as $1.2 trillion, but most of both cannot be borrowed or purchased. For gold, the London market is supported by approximately $700 billion in gold reserves, most of which are held by central banks from around the world in the vaults of the Bank of England. When liquidity tightens, this gold can be loaned out, effectively making central banks the last lenders but the silver market does not have a similar reserve system. The heavy debt burdens of major economies such as the United States, France, and Japan, as well as a lack of political willingness to address these issues, have also led some investors to hoard silver and other alternative assets this year. This has resulted in a broader retreat from government bonds and currencies, known as currency devaluation trading. At the same time, global silver production is constrained by factors such as declining ore grades and limited development of new projects. The three major production countries of Mexico, Peru, and China face a range of obstacles from regulatory barriers to environmental restrictions. Global demand for silver has exceeded mine production for five consecutive years, and silver-backed exchange-traded funds have also attracted new investments. What are the options for investing in silver? Investors often turn to alternative investments such as gold, silver, and palladium to hedge against inflation and other economic uncertainties. When markets are volatile, these "safe haven" assets can help investors diversify their portfolios, as they respond differently to economic conditions than stocks and bonds. There are many ways to invest in precious metals, including through digital investments in precious metal basket funds, ETFs, futures contracts, and mining stocks. Of course, physical assets are also an option, such as jewelry, gold bars, and coins although holding physical assets means considering storage security. It is worth noting that data shows that the VanEck Gold Miners ETF has increased by about 168% year to date, with many of its component companies seeing triple-digit increases. The only gold miner in the S&P 500 index, Newmont Mining (NEM.US), has seen its stock price rise by over 180% year to date, making it the sixth largest component stock in the index in terms of gains. Ryan McIntyre, Senior Managing Partner and Senior Portfolio Manager of Sprott Inc., stated that this shift in investment preferences also represents a leveraged bet on the prospects for gold to some extent. He pointed out that for every 1% increase in the price of gold, gold mining stocks often rise by 2%. Similarly, silver mining stocks have seen similar gains. The Global X Silver Miners ETF has risen by 180% this year. On Tuesday, silver mining stocks rose in response, showing strong investor interest in the industry. Seeking Alpha has highlighted mining companies with strong performance on quantitative indicators. Santacruz Silver Mining (SCZMD.US) leads the pack with a quantitative rating of 4.98, indicating strong potential for performance. Following closely are Guardian Metal Resources (GMTLF.US) and Nexa Resources (NEXA.US), both of which have received a "strong buy" rating, reflecting solid fundamentals and growth prospects. Seeking Alpha's quantitative rating system evaluates stocks based on their relative performance on key quantitative indicators, including valuation, growth, stock momentum, and earnings power. Ratings range from 1 to 5, with scores of 3.5 and above considered bullish, and scores of 2.5 and below considered bearish. Amerigo Resources (ARREF.US), Hudbay Minerals (HBM.US), and Ivanhoe Electric (IE.US) are all silver mining stocks that have received bullish ratings, with gains of over 100% this year.