Commodity Supercycle, Silver, and New Records: Growing Geopolitical Risks

Silver, often called the "poorer cousin of gold," is gaining value, reaching the highest levels in over a decade. Following in the footsteps of gold, which set a new all-time high, silver also surged, with its price surpassing the crucial level of $30 per ounce.Record PricesOn Monday at 9:25, the most active futures contract series for gold was trading at $2442.90 per troy ounce. Earlier in the morning, a new nominal record was set at $2454/oz. Since the beginning of the year, the dollar price of gold has risen by nearly 18%.Silver Follows GoldSilver prices also followed in the wake of gold. The white metal had been unable to surpass the $30 level per ounce for the previous 4 years. This strong technical resistance was decisively broken on Friday afternoon. By Monday morning, silver prices had reached $32.64/oz., reaching the highest values since December 2012.Perspectives for SilverFrom a technical analysis perspective, such a breakout upward is a strong buying signal. The potential range of such a move is $50 per ounce. This is the level of nominal all-time highs from April 2011 and January 1980. Some analysts believe this is just the beginning of a bullish trend in the silver market.Commodity SupercycleThe start of a commodity supercycle could have a significant impact on commodity prices, including silver. A supercycle is a multi-year period of rising and falling commodity prices. Over the past 227 years, there have been six commodity price peaks, with the most recent one occurring in June 2008. From 2020, we have likely started another upward phase, which will probably last until the end of the current decade.The transition to clean energy sources and electric vehicles could accelerate the demand for key commodities, including silver. Silver is a key component in the production of solar panels, which could increase its demand as the energy transformation progresses.Geopolitical RisksHowever, the world must also confront the rising geopolitical tensions and the possibility of some countries, such as Russia, being cut off from energy and metal supplies or grains. This is a factor that was not considered earlier when the debate on a new supercycle began after March 2020.The movement in silver is also a part of the emerging bull market in commodity markets. Since the beginning of spring, copper prices have been rising significantly, reaching new nominal all-time highs. For the past month, we have also seen strong increases in grain markets, which had been in a strong bear market for the last two years.