Macroview Silver is usually referred in financial markets as ‘high-beta gold’ or the ‘poor man’s gold’. As such, the recent appreciation in silver prices is not surprising given the robust performance of gold. April 2016 was a good month for gold, with prices rising by +4.9% per ounce in US dollar terms. But it was a stellar month for silver, which rose by about 15.6%. Silver tends to be highly correlated to gold (the average 12-month rolling correlation since 1980 stands at 0.70), so it is not surprising that both performances point in the same direction. Looking at demand, industrial demand is the key differentiating factor between these two precious metals. Industrial demand accounts for less than 10% of total gold demand, but more than 50% of total demand for silver. Consequently, higher prices for industrial metals tend to favour silver over gold. This is why silver is often viewed as a hybrid metal — part precious, part industrial. Consequently, silver’s recent outperformance likely reflects the recent improvement in the outlook for industrial demand, mostly stemming from stabilisation in China. However, the increasing debt burden means investors should remain wary about the policy support that has been underpinning demand in China.
Topics:
Luc Luyet considers the following as important: Macroview, poor man's gold, silver demand, silver prices
This could be interesting, too:
Stephen Flood writes Why we couldn’t be happier that gold is boring
Stephen Flood writes Will Silver Prices Go Up to 0?
Stephen Flood writes Long Term Gold Price Prediction
Stephen Flood writes SWIFT Ban: A Game Changer for Russia?
Silver is usually referred in financial markets as ‘high-beta gold’ or the ‘poor man’s gold’. As such, the recent appreciation in silver prices is not surprising given the robust performance of gold.
April 2016 was a good month for gold, with prices rising by +4.9% per ounce in US dollar terms. But it was a stellar month for silver, which rose by about 15.6%.
Silver tends to be highly correlated to gold (the average 12-month rolling correlation since 1980 stands at 0.70), so it is not surprising that both performances point in the same direction. Looking at demand, industrial demand is the key differentiating factor between these two precious metals. Industrial demand accounts for less than 10% of total gold demand, but more than 50% of total demand for silver. Consequently, higher prices for industrial metals tend to favour silver over gold. This is why silver is often viewed as a hybrid metal — part precious, part industrial. Consequently, silver’s recent outperformance likely reflects the recent improvement in the outlook for industrial demand, mostly stemming from stabilisation in China. However, the increasing debt burden means investors should remain wary about the policy support that has been underpinning demand in China.