Silver investors and traders have been buying the white metal in a frenzy, with price growth outstripping that of gold, and as a result, the gold-silver ratio has declined.
A major driving force behind the recent push is the resurgence of mainstream investor interest in the sector, said Gary Wagner, editor of TheGoldForecast.com.
“The reason I think it could have happened is one, there is talk of scarcity, but two, the millennials, people who have invested money in the US stock markets in their thirties and forties, realize they need a safe haven asset in case there is a bubble, ”Wagner said.
Silver has become a safe haven asset, Wagner said.
“Silver is a unique metal, as it is one of the most difficult to mold,” he said. “What happens with silver itself is that it has the ability to be a precious metal and at the same time it is widely used in the industry,” he said.
Wagner added that industrial demand is picking up, albeit at a slower rate than rising metal prices.
“The recovery of the pandemic at this time and the economic consequences that will follow lag behind these movements in precious metals,” he said. “What impresses me the most is when you consider that in March, just a few months ago, [silver] broke below $ 12 an ounce … has basically doubled in a couple of months, and that’s huge. ”
Spot silver last traded at $ 22.59 an ounce, down 1.76% in Thursday’s trading session.
As for gold, Wagner maintains a constructive stance, noting that it is only a matter of time before the price reaches all-time highs in US dollar terms.
Much of this recovery in gold and silver was fueled by institutional investors.
“If you look at the compromise of the traders report, even though it’s been delayed by a week, what I’ve noticed in the last three reports is a massive build-up of long positions by fund managers and hedge funds, so these are not the individuals that come in and speculate, “he said.” The institutional purchase of gold and silver represents a large percentage of the activity we are seeing. ”
Central banks have also been buying gold, but to a lesser extent than the previous year, he added.
Wagner said institutional investors may be preparing for tough economic times.
“We haven’t even begun to feel the economic consequences that will follow the pandemic when it ends and when people count the massive spending, the money that governments have spent, that has to come back somehow. GDP [gross domestic product] has been contracting. Right now, we have a budget deficit that is out of control, so these things are inflationary, “he said.
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