Silver closed on Friday 4/28/2017 tenth consecutive day in a loss. The price has decreased by 7,7% during last ten trading days, but is still 8,3% higher since the beginning of the year.
Let’s talk a little bit about silver in general. Together with gold, silver has long history. These metals were considered as main currencies in the past or even part of central bank’s monetary policies.
Silver is currently the second most used commodity in the world (the first place belongs to oil). 75% of mined silver is used in industry whereas the rest of all creates jewellery, coins, silver for investment purposes etc.
An economist Mike Maloney, who is founder of goldsilver.com as well as author of bestseller book “Guide to investing gold and silver”, claims that “silver is going to be much much higher than is these days”. According to him, silver will even outperform price of gold in the future as for percentage of yield.
There are many reasons for this claim. Firstly, demand for silver is enormous, every year it breaks records. Secondly, the interest in having silver coins is really huge as well. Thirdly, most of silver (85%) loses themselves due to bad recycling, which causes the silver never get back to the market. Finally, the most important information is the fact that silver production is decreasing every year. Well, logically… if there is a lack of this commodity, the price must go up sooner or later.
Look at the gold/silver ratio below since 1975 until nowadays. You may better figure out how silver is underperforming nowadays in comparison with the price of gold.
The weekly chart shows how many ounces of silver you need to purchase one ounce of gold. If we looked further into the history, we would find out the average is around 15. The ratio reached a peak of 100 in 1991 and currently equals to 74 ounces of silver. Nevertheless, it has not been higher than 80 since 1995. If so, then only for a couple of weeks. In 2011, when the prices of silver and gold were at the highest level, the ratio reached the number 30 which had not been seen 28 years before. The price of silver was more than five times higher since bottoming in 2008, whereas price of gold rose “only” about 180%.
In this case, moving averages indicate reversal. If there was cross of 50-day moving average with 200-day one from the upper side, then good times for silver emerged which even outperformed the price of gold (expressed by per cent). And these days, this cross happened again. In addition, this can also indicate precious metals having light future.
Tremendous geopolitical risk, uncertainty in central bank’s policies, elections in Europe, potential conflicts between USA and North Korea and the reasons above might contribute not only to boom on price of silver (and gold), but also the prices of precious metals in general.