It’s Time to Give a Little Thought to Silver
In a CNBC interview last week, PureFunds CEO Andrew Chanin pointed out that a lot of people don’t really think about silver.
Well, it might be time to give the white metal a little thought.
Silver has risen along with gold since the Brexit vote, and it went into hyper-drive Sunday. The metal rose 8.6% in the two days, peaking at over $21 an ounce for a time on Monday before falling back on profit-taking. It was the biggest two-day gain for silver since 2011.
Chinese demand was a major factor driving the silver price spike, according to Mining.com:
Silver prices hit a two-year high Monday…as the precious metal continues to gain from the safe-haven rally following the UK referendum, driven mostly by a sudden jump in Chinese demand. Asian buyers scooped up vast volumes of physical silver overnight, with the Shanghai Futures Exchange, the most actively traded silver futures contract, hitting its 6% daily maximum at opening to reach 4,419 yuan ($663) a kilogram. Precious metals have risen on anticipation of further monetary stimulus measures from central banks in the wake of the UK’s vote to leave the European Union.”
Gold has hogged the spotlight since Brexit, pushing to a two-year high in the immediate aftermath of the vote. It has held above $1,300 per ounce and is up nearly 8% since.
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Meanwhile, silver reacted more slowly, but since it has gotten going, it has actually outperformed gold, increasing more than 14% since the UK’s vote to leave the EU.
Chanin said investors should take a look at silver for the same reasons they are buying gold. But other important factors come into play with silver as well:
Silver is a metal that most people don’t really think about when they think about precious metals, but it does have this dual property towards both an industrial metal and a precious metal. So many of the reasons that investors chose to invest in gold, silver has many of those properties, at the same time as having a lot of demand coming from industrials.”
Many analysts think silver still has a great deal of upside, especially taking into account the increasing world-wide interest in solar power. Jeremy Wrathall, mining team leader at Investec, told CNBC silver still has more room to run because of the increasing demand for the metal in solar panels:
Something like 10% of demand comes from solar panels. Solar panels is a growing source of demand for silver, so you have got an additional attraction for silver as well, as a commodity investment and also industrial usage.”
The silver-gold ratio also hints that silver has the potential to see more gains. Despite the recent rally, silver continues to sell at a relatively low price compared to gold. Chanin said looking at history indicates this gap will eventually close.
If you use the silver-gold ratio to look at historical prices versus where we are currently at, for each ounce of gold that is mined, roughly a little less than 10 ounces of silver is mined, but the ratio is trading at around 70:1 and it seems like there may be an opportunity. Historically, that average has been closer to 40, or even lower if you look at a long time period.”
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