{"id":60492,"date":"2023-09-13T12:28:56","date_gmt":"2023-09-13T16:28:56","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/heres-what-the-gold-silver-price-ratio-tells-us-about-silver\/"},"modified":"2023-09-13T12:28:58","modified_gmt":"2023-09-13T16:28:58","slug":"heres-what-the-gold-silver-price-ratio-tells-us-about-silver","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=60492","title":{"rendered":"Here\u2019s what the gold-silver price ratio tells us about silver"},"content":{"rendered":"

Silver has underperformed gold this year, providing an opportunity for investors betting on growth in demand for the white metal, as analysts warn of potential challenges to mining supplies.<\/p>\n

It would \u201cnot surprise us\u201d if silver outperformed from their current levels, with industrial demand for the metal \u201cexpected to grow as the energy transition picks up steam over the coming decades,\u201d said Taylor McKenna, analyst at Kopernik Global Investors. He points out that silver is one of the best conductors of electricity and is instrumental in solar energy and electric vehicle batteries.<\/p>\n

\n

And if silver prices don\u2019t move higher, supply may also decline as \u201cmines shut down and incentives are not there for new ones,\u201d he said.<\/p>\n

On Tuesday, the most-active December silver contract
\n SIZ23,
\n -0.97%<\/bg-quote><\/p>\n

SI00,
\n -0.97%<\/bg-quote>
\n settled at $23.40 an ounce on Comex, after posting a loss of nearly 5.7% last week, the largest weekly percentage decline since the week ended June 23, according to Dow Jones Market Data. Year to date, silver futures have lost nearly 2.7%.<\/p>\n

\u201cSilver provides a good entry point here,\u201d said Keith Weiner, chief executive officer at Monetary Metals in Scottsdale, Ariz.<\/p>\n

He believes the intermediate and long-term trend for gold and silver is \u201cupward as the dollar continues to lose its base.\u201d This can be \u201cpunctuated by short-term news cycles and crises.\u201d<\/p>\n

As of Wednesday, however, the ICE U.S. Dollar Index
\n DXY
\n has gained more than 1% this year. <\/p>\n

The latest reading on the U.S. consumer price index revealed a 0.6% increase in August, the largest rise in 14 months, while the so-called core inflation rose, excluding energy and food prices, rose by a smaller 0.3% in August. The annual rate of inflation rose to 3.7% from 3.2% in July.<\/p>\n

The \u201chotter-than-expected \u201cinflation data supports the argument around the Federal Reserve \u201cstill having some headroom to hike [interest rates] one more time in 2023,\u201d said Lukman Otunuga, manager, market analysis at FXTM.<\/p>\n

That development is likely to support the dollar, so \u201cgold may be exposed to more losses this week,\u201d he told MarketWatch. <\/p>\n

Gold-silver ratio<\/h2>\n

So far this year, silver has declined, but gold has seen notable gains.<\/p>\n

Gold futures\u2019 December contract
\n GCZ23,
\n -0.09%<\/bg-quote><\/p>\n

GC00,
\n -0.09%<\/bg-quote>
\n ended Tuesday at $1,935.10 an ounce, trading nearly 6% higher year to date.<\/p>\n

\u201cSilver tends to be more volatile than gold, while still maintaining a close correlation of price movement over the long term,\u201d Alex Gordon, director at ETF Managers Group, told MarketWatch.<\/p>\n

Historically, the gold-silver ratio sits between 50 and 60, but currently stands at more than 80, he said. That means it would take more than 80 ounces of silver to buy one ounce of gold. The high number points to \u201csilver being undervalued to gold on a relative basis,\u201d said Gordon.<\/p>\n

Kopernik\u2019s McKenna points out that gold is 18 times more rare than silver, which is much lower than the current 88 to 1 ratio assumes. Given that, \u201cit would not surprise us if silver outperformed at least until it reached its long-term 50 to 1 ration average, he said.<\/p>\n

Mining challenges<\/h2>\n

Silver supply fundamentals also point to potentially higher prices in the future, said McKenna.<\/p>\n

\u201cMining is a tough business, but evidence suggests it is only getting more challenging worldwide, especially in areas where silver is most abundant,\u201d he said. Increased pressure and regulation around environmental, social, and governance mandates \u201cdisincentivize investment and could significantly impact supply in the future.\u201d<\/p>\n

Mexico, for example, is the largest producer of silver, he said, but there\u2019s a risk of nationalization recently, as the government nationalized lithium production and adopted higher taxes across the mining sector.<\/p>\n

In Peru, which is also among the world\u2019s largest silver producers, there have been attempts to adopt policies to increase taxes on mining companies, leading many companies to postpone investment decisions, said McKenna.<\/p>\n

He said Kopernik is \u201cexcited\u201d about its investments in mining companies because most are trading below liquidation value, which he describes as valuation assuming current metal prices.<\/p>\n

Those companies include Equinox Gold Corp.
\n EQX,
\n -1.03%<\/bg-quote>,<\/span>
\n said McKenna, noting that the company has built a portfolio of producing gold mines mainly through disciplined acquisitions.<\/p>\n

Equinox Gold trades below liquidation value, assuming current metal prices, and has \u201ctremendous optionality to higher prices,\u201d especially as its new mine, Greenstone in Ontario, Canada, is completed over the next 12 months, he said. \u00a0<\/p>\n

Kopernik counts mining companies that are still shunned by the market as among its investments, said McKenna. \u201cWe see upside to our investments if gold and silver prices stay at current prices, and tremendous upside should they increase.\u201d<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Silver has underperformed gold this year, providing an opportunity for investors betting on growth in demand for the white metal, as analysts warn of potential challenges to mining supplies. It would \u201cnot surprise us\u201d if silver outperformed from their current levels, with industrial demand for the metal \u201cexpected to grow as the energy transition picks […]<\/p>\n","protected":false},"author":1,"featured_media":4005,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-60492","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nHere\u2019s what the gold-silver price ratio tells us about silver | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Silver has underperformed gold this year, providing an opportunity for investors betting on growth in demand for the white metal, as analysts warn of\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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