Russia's Plan to Boost Silver Reserves

A recent report from the Russian news agency Interfax reveals Russia's intention to significantly increase its reserves of precious metals in the coming years. According to the report, the State Fund of Russia plans to acquire gold, silver, platinum, palladium, and gemstones. This decision to include silver in its reserves sets Russia apart from most central banks, which have primarily focused on accumulating gold. This move, along with several other bullish factors, could potentially drive silver prices to $50 and beyond.

Investment in Precious Metals and Gemstones

The Interfax report, translated by Bloomberg, indicates that Russia's State Fund intends to allocate 51.5 billion rubles (approximately $538.7 million) to precious metals and gemstones in 2025, with the same amount earmarked for 2026 and 2027.

Central Banks Diversifying Reserves

In recent years, central banks across the globe have been diversifying their reserves rapidly, with gold being the main beneficiary. In 2023, central banks added 1,037 tons of gold to their reserves, just short of the record-breaking 1,082 tons purchased in 2022. In the first half of 2024, central banks added a net 483 tons of gold, a 5% increase over the previous record of 460 tons set during the same period in 2023.

Why Diversify into Silver?

With the surge in global debt and an expanding money supply, central banks are wisely diversifying their reserves into hard assets such as gold and now, silver. As fiat currencies rapidly lose value and government bonds become increasingly risky, these assets offer a safer alternative. Given the economic sanctions that have cut Russia off from the SWIFT banking system, it makes sense for the country to further diversify its reserves with a variety of precious metals.

Impact on Silver Prices

While the Interfax report did not specify the amount of silver Russia's State Fund plans to acquire, the move is significant as Russia becomes one of the first countries to diversify its reserves into silver. With the continuous surge in gold prices, other nations might also consider adding silver to their reserves. This trend, along with several bullish factors, could drive silver prices to $50 an ounce and potentially even higher.

Technical Chart Patterns

The latest news from Russia supports the technical chart patterns that suggest silver could reach $50 and beyond in the near future. A recent analysis of silver's monthly chart reveals a breakout from a massive, two-decade-long triangle pattern, signaling that silver is on the verge of a powerful bull market.

Gold-to-Silver Ratio

The long-term gold-to-silver ratio chart indicates that silver is currently extremely undervalued relative to gold. If the ratio were to revert to its historical average of 52.8 since 1915, even without any increase in gold’s price, silver would be valued at a solid $50 per ounce.

Inflation-Adjusted Silver Price

When adjusting silver’s price for inflation, it becomes clear how undervalued it is by historical standards. During the Hunt brothers-induced spike in 1980, silver reached an inflation-adjusted price of $143.54. In the 2011 bull market, driven by quantitative easing, it hit $68.04. Currently trading at just $32.20, silver has significant room to rise if it’s to catch up with these previous inflation-adjusted peaks.

Bottom Line

Russia's decision to add silver to its state reserves could mark a turning point for the precious metal. This move, coupled with ongoing bullish trends, could significantly impact silver prices. As global economic uncertainty pushes central banks to diversify into hard assets, silver stands to benefit, especially with technical charts showing signs of a powerful bull run. With Russia leading the way and other countries potentially following suit, silver could break through its long-standing resistance levels, reaching $50 and possibly climbing even higher. These developments, along with historical trends and inflation-adjusted valuations, suggest that silver is severely undervalued and has substantial upside potential in the coming years. What are your thoughts on this? Share this article with your friends and let us know your views. Don't forget to sign up for the Daily Briefing, available every day at 6pm.