LAWRIE WILLIAMS: Will silver outperform gold in the months ahead?
LAWRIE WILLIAMS: Will silver outperform gold in the months ahead? from Sharps Pixley
That is the question asked by the latest newsletter from a leading London-based precious metals analytical consultancy, Metals Focus (which also provides data to the World Gold Council) in its latest weekly newsletter. The conclusion? Yes, probably in a rising gold market, which the consultancy expects. In Metals Focus’ own words: “Typically, in a rising market, silver would be expected to achieve stronger gains, given its much smaller market. Although this has so far largely failed to materialise we do expect silver to eventually outperform gold.”
Silver does indeed usually do better than gold in a rising gold market, but so far this year, despite around a 14% rise in the gold price in U.S. dollars. Silver has not matched te rise in the gold price in percentage terms, having risen only around 9% year to date, but has been rather more volatile hitting a low of around $15.60 in early June. Since then it has made something of a recovery, along with the rising gold price, but the Gold:Silver Ratio (GSR), which is a great guide to relative performance, has been stuck in the 74-76 level after falling to below 68 earlier in the year. As I write, the gold price is at around $1,327, silver at $17.75 and the GSR consequently at 74.8. At a GSR of 68, as it was earlier in the year, the silver price would be around $19.50 which we think would be a more reasonable level for gold’s lower priced sibling.
Given the decline in the value of the dollar vs-a-vis most other major global currencies, neither silver nor gold have performed particularly well so far this year. In Euro terms for example gold is only at about the level it started the year and silver has fallen by a couple of percentage points. But there are indications that silver investment in the U.S. in particular may be beginning to turn up, although the take up of the easily investable silver bullion coins year to date has been particularly poor. Metals Focus sees little signs of a turnaround – indeed reckons that 2017 may be the weakest for a decade in terms of sales of silver eagle coins by the U.S. Mint, but there has been a slight pickup in silver deliveries into the exchanges apparent since the latest newsletter was published.