Silver futures marked their biggest sell-off in nearly four years on Monday, fueled by a sharp rise in investment demand as the metal continues to catch up with sister metal gold.
Trading in the gray metal is worth just 10% of what gold sees every day, so hedge funds and other money managers who want to catch up on the yellow metal’s jump to new all-time highs could expect get more for your silver money, “said Adrian Ash, director of research for BullionVault.
The September SIU20 silver contract,
It rose 73 cents, or 3.9%, to hit $ 19,788 an ounce on Monday. That was the highest ending for a more active contract since September 2016, according to Dow Jones Market Data. Gold on Monday, meanwhile, he saw his August GCQ20 contract,
settle at $ 1,814.10 per ounce, close to the $ 1,820.60 it settled on on July 8, which was the highest since September 2011.
There has been a historically high purchase of physical silver through silver exchange-traded funds in the past few months alone, said Peter Spina, president and CEO of GoldSeek.com. “Never in the history of silver have we seen so much demand for [the metal] in such little time “.
As of June 30, global silver holdings in silver exchange traded products, or ETPs, which include ETFs, reached a “new all-time high of 925 million ounces, which is approximately 14 months of mine supply,” according to a recent report from The Silver Institute, an international industry association. ETP growth in the first half of 2020 of 196 million ounces “comfortably exceeded” the highest annual entry of 149 million ounces established in 2009, according to the report.
Among the reasons for the increased interest in silver, Spina noted that the metal has been “scrapped and largely ignored in recent years, as many former silver buyers turned to cryptocurrency and more exciting markets.” However, the value of silver is “hard to ignore,” Spina, who is also president of silver news and analytics provider SilverSeek.com, told MarketWatch.
“One of the best indicators of value is the relative value of silver to gold,” he said, noting that during extremes in market mass sales, the ratio of gold to silver could rise to around 130, which means it would take 130 ounces of silver to buy one ounce of gold. That proportion is now below 100 again, but that number should be closer to 50, he said. “Even at a ratio of 50, silver is a far cry from the ratio found naturally,” said Spina, as silver is at a ratio of almost 20 ounces per ounce of gold.
BullionVault’s Ash said that even if the ratio manages to retreat to 84, the end of its four-year uptrend, in late August from the current four-month low of 93, that would put silver at $ 21.50, if gold holds the $ 1,800 level. A move toward gold of all time, a spike of about $ 1,900 could put silver at $ 22.60, he said.
The settlement record for the most active gold futures is $ 1,891.90 as of August 22, 2011, according to records dating back to November 1984, according to Dow Jones Market Data. The record intraday level was seen at $ 1,923.70 an ounce on September 6, 2011.
Ash told MarketWatch that silver has jumped from its COVID-19 price drop to an 11-year low in mid-March by 58% in just 80 trading days. That puts March-July 2020 performance at the “top 4% of all four-month earnings for the past half century,” he told MarketWatch. Even so, silver has overcome this current increase on many occasions: in 1974, 1979, 1982, 1987, 2010 and 2011, which marked moments of extreme economic or financial stress, so “when silver moves, it can really move ” said.
“The number of private individuals seeing stability and diversification with precious metals has never been greater,” with silver holdings at BullionVault 26% year-to-date, compared to 11% growth in gold, Ash said.
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$ 100 per ounce of silver ‘is not entirely unreasonable for years to come …’
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With gold now going to $ 2,000 and beyond, silver is set to go higher as well, Spina said. She said her first target for silver prices is $ 25 to $ 30 in the coming quarters, but the silver “takeoff” is “now underway.”
For years to come, with gold moving above $ 2,000, Spina sees silver “revisiting its adjusted inflation-free highs of $ 50” and potentially higher, with silver at $ 100 per ounce “not unreasonable at all. years to come, and it may surprise many how fast it can move. “
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