By Joe Wallace
Silver prices climbed to their highest level in nearly three years Monday, lifted by factory reopenings and soaring investor demand for precious metals.
Front-month futures linked to the metal rose 3.8% to $19.709 a troy ounce in New York, recording their highest settlement since September 2016. Silver prices have soared 68% since their nadir in mid-March, outstripping gold, the S&P 500 and an ICE BofA index of U.S. government bonds.
Investors have snapped up precious metals in recent months, encouraged by the extraordinary steps central banks and governments have taken to shore up economic growth during the coronavirus pandemic. The drop in short-term interest rates and the Federal Reserve's purchases of a range of bonds have lowered yields in a swath of debt markets, reducing the opportunity cost of owning precious metals, which pay no income.
Silver prices have also benefited from the reopening of factories in the U.S., China and elsewhere. Silver has widespread industrial applications in making solar panels, medical equipment and consumer electronics, among other goods. As a result, prices typically rise when economic growth accelerates, a key difference between silver and gold.
"You're flying on two engines, which are commercial demand and investor demand," said Michael Widmer, a commodities strategist at Bank of America. "That's driving silver prices higher."
One popular way for investors to buy precious metals is via exchange-traded funds. Assets under management in BlackRock's iShares Silver Trust, the biggest silver-backed ETF, have risen by almost $2.45 billion to $9.72 billion this year, according to FactSet.
Gold has also seen a surge in appetite among investors in recent months: front-month futures have climbed 23% since March 18 to $1,811 a troy ounce. That has put the metal a hair's breadth away from its record high of $1,888.70, notched in August 2011.
As gold has become steadily more expensive, some investors have opted to buy silver instead, said Georgette Boele, senior precious-metal strategist at ABN Amro Bank. Ms. Boele expects silver prices to end the year slightly higher than they are now, at $20 an ounce, but predicts swings in the coming months.
"It's the more volatile brother of gold," Ms. Boele said. "The market is much thinner so when you get a move it's generally big."
Giving prices an extra lift, the pandemic has disrupted mines in Latin America, the world's main silver-producing region. It has also made it difficult to transport the metal to regions where demand is high. An outbreak of Covid-19 among staff last week prompted London-based Hochschild Mining PLC, for instance, to halt operations at its Inmaculada gold-silver mine in southern Peru.
There is no danger of the world running out of silver, said Ms. Boele. Unlike palladium or platinum, which are produced in large quantities by only a handful of countries, silver is mined across Latin America as well as in China, Australia and Russia.
Elsewhere in commodities, oil prices fell ahead of a meeting of key members of the Organization of the Petroleum Exporting Countries and its Russia-led allies on Wednesday. An alliance of crude producers led by Saudi Arabia is pushing the cartel to boost production starting in August, delegates said over the weekend. Brent-crude futures, the benchmark in international energy markets, slipped 1.2% to $42.72 a barrel.
Front-month copper futures climbed for the 12th consecutive session, ending the day up 1.9% at $2.9420 a pound -- their highest level since April 2019. The latest leg in the base metal's rally was sparked by worries of a supply shortfall after workers at an Antofagasta PLC mine in central Chile voted to go on strike.
Write to Joe Wallace at Joe.Wallace@wsj.com
