UAE: Silver outperforms gold as prices hit record highs; investments, profits explained

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Gold prices in the UAE have been consistently on the rise, hitting one record after another over the past few weeks. However, there is another precious metal that has been outshining gold’s record rally: Silver. The commodity has significantly outperformed gold this year so far, with gains of nearly 33 per cent compared to gold's 17 per cent, according to an expert.

Spot silver prices recently surpassed the $30-per-ounce mark, hitting their highest point in more than a decade.

The metal is among the best-performing major commodities this year. Prices soared from around Dh2,800 per kg at the start of the year to over Dh3,800 to date.

Vijay Valecha, chief investment officer at Century Financial, told Khaleej Times the metal rallied from Dh3,127 per kilogramme on May 1 to Dh3,870 on May 21.

From an investment perspective, here is what its performance to date means, according to the expert: “Had an investor invested Dh10,000 in silver at the start of January 2024, he/she would have roughly Dh13,415. Had the person invested the same amount in 24K gold, he/she would have a final value of Dh11,701.”

Silver is not the first choice for investors in the UAE. However, its record rally could see investments increase, said Valecha.

“Similar to gold, investors looking to invest in silver can do so by purchasing physical silver in the form of bullion or the form of jewellery. Bullion is a term that encompasses physical bars and coins,” said Valecha.

Will silver continue to shine?

Ole Hansen, head of Commodities Strategy at Saxo Bank, said the recent rallies in both silver and gold are not solely driven by their traditional role as safe havens. “Instead, they are supported by broader market dynamics and investor sentiment. Metals are increasingly viewed as attractive investment opportunities amid tight supply for key industrial metals and robust demand projections,” he told Khaleej Times.

Although silver's recent gains have outpaced those of gold, it remains relatively affordable, according to another expert.

“Both precious metals tend to move in tandem due to their similar roles as macroeconomic and currency hedges,” said Mohamed Hashad, chief market strategist at Noor Capital. “Gold's price has hit record highs, driven by central bank purchases, retail interest in China, and renewed expectations of lower US interest rates. Silver has followed suit, benefiting from these trends.”

Silver's value is underpinned by its dual role as both a financial asset and an industrial commodity. “It is essential in various industries, including clean energy technologies. Silver is a key component in solar panels, and with the industry's robust growth, silver usage is expected to reach record levels this year, according to the Silver Institute.”

Hansen agreed. “This industrial demand and investment interest position silver as a compelling asset in the current market environment.”

According to him, the factors driving investor sentiment in gold and silver include geopolitical risks, Chinese retail demand and debt concerns (rising debt-to-GDP ratios). Inflation outlook is another factor. “The shift in focus from lower rate cut expectations to reaccelerating inflation provides additional support.”

According to Hashad, while gold and silver are the traditional go-to investments in precious metals, palladium and platinum present “attractive alternatives” due to their unique market dynamics and industrial uses.