Raw materials in this article
• Silver lags behind gold in terms of performance
• Gold investors with different intentions than silver investors
• Market environment gives all investors hope for price increases
Silver still has a lot of catching up to do compared to gold: while the price of gold has increased by around a third in the past twelve months, silver has only increased by around 20 percent in the same period. The price trends look very similar: After months of sideways development, the corona crisis in March caused a significant price slump for both silver and gold, from which both metals recovered in the following weeks. But while gold has already completely offset its losses and is currently even trading higher than before the corona-related crash, silver is still significantly behind its 12-month high from September.
Market conditions speak for gold and silver
The fact that gold is outperforming its little brother silver in terms of performance is probably due to the fact that investors have very different intentions when investing in the two metals.
Gold is considered a crisis metal, and many investors use it as a safe haven if the air on the stock markets becomes thinner or the markets are in turmoil. Uncertain economic prospects have always driven investors into gold investments. Investors are currently finding all of these conditions: after the longest bull market in history, many indices have started an impressive recovery. This, in turn, has raised concerns about possible overvaluations on the trading floor, which have driven many investors on the financial markets even before the pandemic occurred. In addition, the global economy is unlikely to be able to cope with the consequences of global lockdown activities as quickly as the recovery on the stock market seems to indicate. On the contrary: The US Federal Reserve has only recently painted a bleak picture for the US economy, and the German economy has also slipped into a recession.
Gold is held long term …
Central banks worldwide are bracing themselves against the consequences of the crisis with a real flood of liquidity, pumping billions over billions into the economy. While the effects of the recession should be mitigated at best, the monetary rain of the monetary watchdogs brings with it other problems: It massively promotes the devaluation of money. Inflation concerns have always been one of the most important arguments for gold investors. Because the precious metal is considered stable in value. Gold deposits are naturally limited, while fiat money can be reprinted in unlimited quantities. Many investors who at least want to preserve their assets prefer to invest in gold.
… you trade in silver
The current market conditions also apply to silver as an incentive to buy, albeit in a significantly weakened form. Because – as with gold – the silver deposits are physically limited, the available resources will be used up at some point. This also distinguishes silver from fiat money, which can theoretically be reprinted in unlimited quantities. But there is an essential difference between the two metals: silver is in high industrial demand as an industrial metal. However, due to Corona, many branches of industry are currently still idle, which has caused the demand for silver to collapse recently, while gold came out of it as inflation protection without a drop in demand and was even more in demand instead. The fact that silver recently ushered in a clear recovery rally may be due to the hope of many investors that the economy will start up again in many countries after the end of the first Corona wave, and thus many industries that need silver will come back in again production will start. The managing director of RBC Wealth Management also confirmed this to the Canadian precious metals dealer Kitco: “Silver will do a little better than before,” said George Gero. “Silver was held back because of its industrial component. With the reopening of many economies, the industrial component becomes a backwind instead of a headwind.”
Price increases possible with both
Investors who invest in silver are more likely to rely on an economic recovery and bet on higher demand for the metal from the industrial side, which will then help the silver price to jump. Silver as inflation or asset protection, on the other hand, should only play a role for a small proportion of investors, possibly for those for whom gold has now become too expensive at a price of over $ 1,700 per troy ounce, while silver at around 17 The US dollar seems significantly more affordable.
“Gold is to hold and silver is to trade,” says a Kitco News report. The current market environment gives investors of both metals hope for price increases.
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