Silver Is Cheap And Has More Potential Than Gold - ETF Securities
(Kitco News)- Although the silver market has struggled to find momentumsince the start of 2018, one investment firm is not giving up on the whitemetal.
In a recent report, Maxwell Gold, director of investmentstrategy and research at ETF Securities, said that he still expects silver tooutperform gold this years, as investors adjust to growing industrial demanddue to renewed global economic growth.
The firm reiterated its forecast for the precious metal totrade in a range between $19 and 20 an ounce by the end of the year. Marchsilver futures last traded at $16.65 an ounce, down 0.37% on the day.Currently, silver prices are down almost 2% since the start of the year as themarket has been unable to hold a critical psychological level at $17 an ounce.
April gold futures are trading at $1,350 an ounce, up more than 3%since the start of the year. Gold’s outperformance has kept the gold/silverratio at a multi-year high. Gold added that the yellow metal is currentlybenefiting from short-term technical momentum, while silver is supported bysubstantial long-term market fundamentals of growing demand and shrinkingsupply.
“When you put all these factors together, that paints a verybullish picture for silver,” he said. “I like gold, but I like silver a lotmore.”
Because of the high gold/silver ratio and silver prices below$17 an ounce, Gold said that it is only a matter of time before investors startto take more interest in the white metal. He added that current pricesrepresent an attractive entry point for long-term investors.
“People are scratching their heads wondering why silver isn’tpicking up along gold but we didn’t see the industrial cycle pick up until theend of last year and beginning of this year. Rising global growth is going tohave a much bigger impact on silver going forward,” He said.
Along with growing industrial demand, Gold said that silvercould also outperform well on the investment side as investors look for assetsto hedge against inflation. Gold is seen as a traditional inflation hedge, butGold's research has shown that base metals, including silver, show strongerreturns in a rising inflationary environment.
Gold added that his research also shows that short-termspikes in volatility benefit gold prices more than silver; however, silveroutperforms gold when there is an ongoing correction in equity markets.
“Investors have remained absent in the silver market inrecent of years, but if we get further equity weakness, if we get furtherinflationary pressures and the U.S. dollar remains weak, that is going to be abig tailwind for silver to outperform gold,” he said. “Investors see silver asa way to diversify factor risk exposure while still keeping up with cyclicalgrowth and rising inflation. You get the best of both worlds."
It's not only the demand side of the equation, But Gold also said thatdwindling mine supply and continued reduction in above-ground stocks is helpingto reduce the overall supply of the grey metal.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.