Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Safe Haven Silver To Outperform Gold In Q4 And In 2018

Commodities / Gold and Silver 2017 Oct 04, 2017 - 02:40 PM GMT

By: GoldCore

Commodities

– Safe haven silver to outperform gold in Q4 and 2018
– “Expect silver to eventually outperform gold” say Metals Focus

– 2017 YTD, silver has underperformed gold, climbing by 5% versus 11%
– Silver undervalued versus gold and especially stocks, bonds and many property markets
– Will follow gold’s reactions to macroeconomic & geopolitical factors and should outperform gold
– Special report on India shows it accounts for just 16% of global silver demand
– Silver a “safe haven at times during which gold failed to be” according to academic research


Editor Mark O’Byrne

Since the beginning of 2017 the silver price has disappointed many investors. With a 5% gain so far in 2017, it has failed to match gold’s 11% gains this year. Both precious metals have ultimately performed below expectations given the positive macroeconomic and geopolitical backdrop.

However, things are starting to look up for the industrial precious metal as industry observers believe it will outperform gold this quarter and into 2018.

In a recent Metals Focus report, the precious metals consultancy concluded that we do expect silver to eventually outperform gold.’ 

Whilst demand for silver coins in the US has been weak, there are some indicators that suggest this physical demand is beginning to pick up, alongside industrial demand. For example, there has been robust silver ETF demand and in September there was significant uptick in those taking immediate delivery on COMEX.

This year has also taken many market participants by surprise as silver demand has fallen in a number of areas. One of which is India.

The Metals Focus report for the Silver Institute believes that Indian demand in 2017 has not matched the decades’ unprecedented silver demand due to higher prices and a clampdown by Indian government on unbanked money in the drive to the cashless society.

However, incomes and the economy and both growing which leads the report to conclude that demand will come back to the country with a bang.

Gold-Silver ratio shows silver undervalued

In June, silver hit a low of $15.60/oz, since then it has recovered somewhat. The gold-silver ratio is also higher than expected, given gold’s performance of late. Earlier this year it fell to as low as 68, but has recently been stuck between 74 and 80.

The modern historical average is around 40 to 1. The long term historical average is 15 to 1.

Not only is silver undervalued relative to gold but also to increasingly over valued stocks, bonds and property markets.

Given silver’s industrial role and the fact that geologically there are just 15 particles of silver to every one particle of gold, it is likely that the gold/silver ratio will gradually return to below the 100 year average of 40 to 1.

At the current depressed gold price this would put silver at nearly $32/oz.

India’s love for silver

Love for gold in the world’s seventh largest economy is well-documented but few are aware of its feelings towards silver.

In 2016 India’s demand for silver accounted for just 16% of global demand. The report summarises the all important context for this:

India is one of the world’s largest silver markets, with a very traditional core in a diverse market. To put this into perspective, India consumed 160.6Moz (4,996t) last year, which accounted for a noteworthy 16% of global silver demand. It is not only the scale of Indian demand that matters; the country’s dependence on imported metal means that changes in Indian offtake can impact those countries that supply bullion to India.

The sheer scale of the Indian silver market resonates across much of the country, from physical investment, through to day-to-day activities.

It is also integral to India’s cultural and belief systems. It is therefore not surprising that silver is an important part of Indian festivities and weddings.

For example, it is considered auspicious to gift silver during weddings or for the birth of a child. All this means that silver’s appeal extends across most income groups. Even so, the silver market in recent years has evolved considerably in line with the growth in the Indian economy and the rise in
incomes.

Regarding demand, jewellery, silverware and physical investment account for around 75% of total Indian silver demand. With jewellery and silverware accounting for more than 50% of total silver demand.

Investment demand is increasing from a very low base.

In 2010 the two markets combined accounted for 1,200t. By the end of the decade the Silver Institute believes ‘the market will expand further to around 109Moz (3,400t), driven largely by healthy economic growth.’

Industrial demand accounts for just 22% of Indian demand and, like investment silver, it has struggled in recent years. The report explains, that this was due to an economic slowdown:

‘This saw Indian demand fall from 45.7Moz (1,421t) in 2010 to 35.9Moz (1,115t) in 2015. However, with the economy improving over the last two years (GDP growth is back over 7%), we expect industrial demand to continue to rise in the coming years.’

Outlook has a silver lining

World Gold Council data-provider Metals Focus’ conclusion will bring some hope to silver investors:

the case for further price gains, for both silver and gold still appears strong. Together with negative interest rates (in real or nominal terms) in several key currencies, expectations for Fed rate increases have also been pushed further out. This should make the case for a weaker dollar going forward. Along with heightened geopolitical concerns, investment demand should strengthen. While gold will be the main beneficiary, silver prices should also improve.”

Overall, silver will not only step back up to the plate but it will excel the lacklustre performance of this year.

“Given silver’s much smaller market (compared with gold) it should experience greater price volatility. This in turn should see silver prices eventually outperform gold, both later this year and into 2018”

A buying opportunity

We can sit and ponder where we think the price may or may not go in the last three months of the year. We can also sit and hypothesise as to why both gold and silver haven’t performed better this year. Neither of these scenarios help our portfolios.

Instead we have to focus on what we do know – silver is currently relatively cheap when considered against a backdrop of heightened geopolitical concerns, rising inflation and ever-prominent and increasing debt risks.

History tells us that very little currently at the forefront of both economic and political concerns are going to be dealt with without negative consequences. History also tells us that silver has a key role to play as a safe haven in your portfolio.

Academic research echoes this sentiment.

Should you believe the politicians both here and across the pond that the economy is improving, this is a further reason to hold silver as part of your portfolio. In 2012 Belousova and Dorfleitner concluded that

‘Adding silver or platinum to a portfolio [of stocks, sovereign bond and the money market instruments] during bull markets reduces volatility and enhances return.’

When looking at all four precious metals’ role as a safe haven between 1989 and 2013, against the S&P 500 and US 10 year bonds, Lucey and Li (2015) found that ‘silver was a safe haven at times during which gold failed to be’but also during far more quarters than both platinum and palladium.’

Gold Prices (LBMA AM)

03 Oct: USD 1,270.70, GBP 959.00 & EUR 1,081.87 per ounce
02 Oct: USD 1,273.10, GBP 956.48 & EUR 1,084.55 per ounce
29 Sep: USD 1,286.95, GBP 963.15 & EUR 1,090.82 per ounce
28 Sep: USD 1,284.30, GBP 961.04 & EUR 1,091.40 per ounce
27 Sep: USD 1,291.30, GBP 963.83 & EUR 1,099.54 per ounce
26 Sep: USD 1,306.90, GBP 969.59 & EUR 1,105.38 per ounce
25 Sep: USD 1,295.50, GBP 957.89 & EUR 1,089.26 per ounce

Silver Prices (LBMA)

03 Oct: USD 16.61, GBP 12.53 & EUR 14.13 per ounce
02 Oct: USD 16.58, GBP 12.46 & EUR 14.12 per ounce
29 Sep: USD 16.86, GBP 12.60 & EUR 14.27 per ounce
28 Sep: USD 16.82, GBP 12.53 & EUR 14.28 per ounce
27 Sep: USD 16.89, GBP 12.58 & EUR 14.38 per ounce
26 Sep: USD 17.01, GBP 12.67 & EUR 14.43 per ounce
25 Sep: USD 16.95, GBP 12.57 & EUR 14.27 per ounce

Mark O'Byrne

Executive Director

This update can be found on the GoldCore blog here.

IRL
63
FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

UK
NO. 1 CORNHILL
LONDON 2
EC3V 3ND

IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160

W http://www.goldcore.com/uk/

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information containd in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in