– Silver just 1/70th the price of gold
– Silver at $17.50 per ounce set to rise “faster than gold”
– Silver Eagles (1 oz) buying jumps to 715,000 this week
– “Supply may drop following mine closures” – Standard Chartered
– Industrial demand “will remain strong” – CPM Group
– Silver is substantially undervalued versus gold
– Gold silver ratio to fall back below 30
Silver looks set to outperform gold again in the coming months due to falling mine supply and continuing robust global demand.
Silver at just $17.50 per ounce remains about 1/ 70th of the price of gold at $1,230/oz today. This gold silver ratio of 70.3 continues to drive silver ‘stackers,’ value investors and those seeking a better return than gold to accumulate silver at what are seen at these still relatively cheap levels.
This is seen in continuing robust demand for the very popular silver bullion coin this week. The U.S. Mint sold 715,000 of Silver Eagles ( 1 oz) this week, to bring the year to date sales totals for 2017 to a robust – 7,557,500 Silver Eagle coins.
|US Mint Bullion Coin Sales (Number of coins)|
|Monday Sales||Last Week||Feb Sales||Mar Sales||2017 Sales|
Source: GoldCore via Coin News
We have seen very robust demand for silver again this year, especially from clients in the UK and Ireland buying silver bullion coins (now VAT free) such as Silver Eagles. We are seeing even greater demand for Silver Maples and Silver Philharmonics.
The increasingly favorable supply and demand fundamentals of the silver market were reported on by Bloomberg in an article entitled ‘Silver Seen Climbing Faster Than Gold as Yellen Wakens Bulls’.
According to Bloomberg:
Investors may be better off with silver rather than gold. The Federal Reserve’s pledge to stick to its dovish outlook on U.S. monetary policy has fueled a rally in precious metals and silver usually beats its more valuable peer in a rising market.
After the Fed raised interest rates by a quarter percentage point Wednesday, Chair Janet Yellen said the central bank was willing to tolerate inflation temporarily overshooting its 2 percent goal and intended to keep its policy accommodative for “some time.” UBS Group AG said the gradual pace of tightening means negative rates will deepen, the dollar weaken and gold rise.
The gold-to-silver ratio rose to 71 on March 14, the most in two months, and above an average of 62 in the past decade and a low of 32 in 2011, showing there’s potential for silver to appreciate versus its peer. Spot silver added 0.9 percent to $17.4964 an ounce, extending a 2.7 percent gain a day earlier.
The metal, sometimes called “poor man’s gold,” has risen more than 9 percent this year, while gold’s up less than 7 percent. The unpredictability of President Donald Trump’s administration and risks surrounding the outcome of elections in France and Germany this year have driven haven demand.
Supply may drop following mine closures and prices need to rise to boost output, according to Suki Cooper, analyst with Standard Chartered Plc in New York.
On demand, industrial use is expected to be roughly flat this year, though still near a record, said Jeffrey Christian, managing director of CPM Group. “Use in solar panels, electronics, batteries, jewelry, chemical process catalysts, and other manufactured products will remain strong,” he said.
We see silver as undervalued vis-à-vis gold but more especially vis-à-vis stocks, bonds and many property markets. Rather than selling the financial insurance that is gold, we would advise reducing allocations to stocks, bonds and property and allocating to physical silver.
We expect the gold silver ratio to fall back below 30 in the coming months and years. Indeed, given the favorable supply demand dynamics in the silver market and the fact that a huge amount of silver, unlike gold, has been used in industrial applications in the last 150 years and this continues with new tech uses today, we expect the gold silver ratio to mean revert to the long term average of 15 to 1 (see chart above).
Gold and Silver Bullion – News and Commentary
Gold Prices (LBMA AM)
21 Mar: USD 1,232.05, GBP 989.21 & EUR 1,141.37 per ounce
20 Mar: USD 1,233.00, GBP 993.92 & EUR 1,146.57 per ounce
17 Mar: USD 1,228.75, GBP 991.85 & EUR 1,140.53 per ounce
16 Mar: USD 1,225.60, GBP 998.74 & EUR 1,143.24 per ounce
15 Mar: USD 1,202.25, GBP 986.69 & EUR 1,132.04 per ounce
14 Mar: USD 1,203.55, GBP 992.33 & EUR 1,130.86 per ounce
13 Mar: USD 1,207.80, GBP 989.79 & EUR 1,132.07 per ounce
Silver Prices (LBMA)
21 Mar: USD 17.31, GBP 13.88 & EUR 16.01 per ounce
20 Mar: USD 17.23, GBP 13.92 & EUR 16.03 per ounce
17 Mar: USD 17.40, GBP 14.08 & EUR 16.21 per ounce
16 Mar: USD 17.46, GBP 14.21 & EUR 16.28 per ounce
15 Mar: USD 16.91, GBP 13.87 & EUR 15.92 per ounce
14 Mar: USD 17.00, GBP 14.02 & EUR 15.99 per ounce
13 Mar: USD 17.02, GBP 13.92 & EUR 15.95 per ounce
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