Investors have focused on a surge in record gold prices, but silver rose roughly 25% in July, the metal’s second-highest recorded monthly gain, and is still undervalued compared to the yellow metal.
“Silver is often called ‘poor man’s gold’ because some of the same factors that drive gold prices up do the same thing with silver prices,” says Ed Moy, chief market strategist at the retailer in Valaurum gold. “And what is driving gold prices now is primarily fear of inflation due to the magnitude of the monetary and fiscal stimulus worldwide, and the flight to safety due to uncertainty about how and when the economy will recover. global”.
Silver, however, is “cheaper per ounce” than gold, and its prices are much more volatile, he says. It has also been “lagging behind the increase in gold” and the ratio of the number of ounces of silver to buy an ounce of gold is historically high, implying that “gold is overvalued or silver is undervalued.”
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If silver has a low price, “there is a lot of money to be made.”
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If silver is priced low, “you can make a lot of money,” says Moy, who was director of the US Mint from 2006 to 2011.
SIU20 silver futures,
SI00,
settled at $ 24,501 an ounce on July 27, the highest for a more active contract since August 2013. As of July 30, they were around 25% higher this month, but they are not close to the record $ 48,599 April 2011. By comparison, GCQ20 gold,
GC00,
It rose to a record deal at $ 1,953.40 on July 29, an increase of about 8.5% this month.
Read:Gold hits record, with prospects of $ 2,000 per ounce stronger than ever
“Silver is not even half past record high,” says Ryan Giannotto, research director at GraniteShares, an issuer of exchange-traded funds. While silver is unlikely to double in the foreseeable future, it is “unwise to rule out extreme scenarios.”
It takes more than 80 ounces of silver to buy one ounce of gold. Although the ratio has seen a significant decline in recent months, it is still well above the typical gold-to-silver ratio, which Moy sets at one ounce of gold at 60 ounces of silver.
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Ross Norman, CEO of precious metals news and information provider Metals Daily, says the ratio of metals rose to a peak of 4,000 years at 126 on March 18. “It has been clear for some time that silver was excessively cheap compared to gold,” he says. The ratio remains historically high, “suggesting that there is still scope for further silver gains.”
He says that gold “often looks to silver to ‘authenticate’ its recovery,” and if the difference between the two metals becomes too wide, as it has recently, then gold “stagnates.” For now, gold, at its highest point of all time, is largely “untied by technical resistance levels.”
For those looking to invest in the silver market, futures contracts are “good for experienced speculators who know how to handle complicated transactions and have time to make moment-to-moment decisions and compete with financial investment professionals,” says Moy.
For most individual investors, government-made silver bullion coins are an attractive way to invest, he says, and governments guarantee the weight, content, and purity of each coin. A spokesman for the United States Mint said the bureau has shipped 604,000 more ounces of silver bullion this year through June, compared to the same period last year.
However, currencies can see “high commission margins” on the spot price, says Giannotto. ETFs are considered the “best, easiest and most economical way to access precious metals”. The iShares Silver Trust SLV with silver backing,
It has gained about 28% in July.
Silver can “trade idiosyncratically and sometimes violently,” so those who enter the market may consider “balancing exposure with other historically less volatile precious metals such as gold or platinum,” says Giannotto.
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