November 13, 2019, 12:44


Will Silver Take the Shine Off Gold?

Will Silver Take the Shine Off Gold?

The timing is more than auspicious for investors to put their money in silver, according to many precious metals sector analysts; they contend that a “silver gap” for gold is ideal for savers.

The “gap for gold is a great opportunity for savers, Die Welt reported a few days ago. According to the German newspaper, since the price of gold has risen faster than silver in recent years, it offers potential to those looking to put their money in precious metal. Professional investors and private savers share the same opinion: “All investors are betting on a furious comeback of the white precious metal.”

Dimitry Speck, a precious metals expert from Munich, explained what exactly this means for investors.

“Today, silver is becoming attractive…The gold price is currently above the so-called resistance line, formed in 2014, and it amounts to $1,360 per ounce…That means that technically, the price of gold has no ceiling. That’s a very positive sign, when an asset breaks a long-standing horizontal resistance upwards.” Speck said.

“Background” for Silver

“What’s still at the 2016 level is indeed the price of silver,” the stated.

“What you have to know here is that silver as a percentage grows stronger when we are in a bull market. So that’s when it goes up, not earlier.”

The reason for this is production: “With gold, we have a very large above-ground gold stock amounting to 190,000 tonnes with annual production of about three thousand tonnes. With silver, the above-ground stocks are much lower. So it is quite normal that silver prices are lagging behind. At the same time, literally in recent days, silver prices have increased significantly, which I find quite positive.”

The price of silver has increased significantly since mid-July and is currently around €14.86 per ounce (as of 24 July).

Expert: “Silver can outperform Gold”

Gold and financial market expert Speck has meticulously studied the price ratio between gold and silver.

“If you look at that over the long term, you’ll see that over the past 100 years, the price of silver has been only three times the current level in relation to the price of gold – in the early 1940s, late 1980s and today. Silver is currently extremely cheap in relation to gold. The likelihood of silver outperforming gold is rather high,” he said.

According to Speck, even if, against expectations, the price of gold falls in the near future, “silver will naturally fall as well, but not so decisively.” Silver currently has “a very nice short risk ratio.”

Tips for Investors

“In any case, I would advise buying physical gold and silver,” the Munich-based gold market analyst pointed out.

“It is a very good time to buy. In any case, it’s a good time to buy physical precious metals, preferably one-ounce coins, because these are the easiest to sell and the spread between buying and selling is rather low. This also applies to silver. Here I would pay attention to the so-called differential-taxed silver coins because they have a lower VAT rate.”

©
AP Photo / Michael ProbstSilver bullions, weighing five kilograms each (File)
Silver Shares as an Option?

According to the expert, when buying silver as an investment tool, there are some things for investors to note. This is clearly demonstrated by the share prices of First Majestic Silver, which soared 28% last week. Thus, the share price has exceeded the gold price four-fold. But investors have to understand that as soon as the uptrend ends and there is a slight correction, equities will lose value again.

This has recently been demonstrated, for example, by the shares of the Mexican-British company Fresnillo, the world’s largest silver producer. According to Speck, the silver share of the company “was significantly lower than expected with the production figures for the second quarter.” Unlike the shares of most other silver producers, Fresnillo shares didn’t go up over the week; they fell by 13%.

“Here we clearly see that even with a rising silver price, you still have to look at which stocks in this sector you can rely on.”

In any event, Speck advises to bet on the real, physical silver instead of shares of silver-mining companies. According to him, the precious metals market has recently been the subject of speculation, which provokes share price spikes. Precious metals, silver and gold, are valuable only in their tangible form. Owning them only on paper could ultimately be a disadvantage for investors.

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