Leading economic analysts have been predicting the rise of silver prices in 2019. The expectation is for the Gold/Silver ratio to go lower as silver outperforms the yellow metal.
The demand for silver to be used in industrial applications is also expected to grow. The demand for silver has been growing for five consecutive years and silver miners now have to look at finding ways to meet the growing demand. Silver surplus is expected to fall this year going against the trends that were seen in 2016-18 which discouraged institutional investors to stay in the silver market.
The silver market is small compared to that of gold which means that gold had more investors than silver, however, things seem to be changing now as silver gains traction over gold resulting in the gold-to-silver dropping to 70.
The gold/silver ratio is simply a measure of the value of these two metals relative to each other. This month, the ratio started at 84 but dropped to the low 70s. This would mean the price of silver will rise above $18.50. This would be a 20% rise from current levels, but that depends on gold holding steady at $1300 per ounce.
For the past 7 months, gold has traded at 80 times over the daily price of silver. The last time gold traded at this level was during the period of 1990 and 1993. That was the longest stretch for gold to stay on the peak against cheaper metals like Silver. This stretch has run to 147 days and it has already outnumbered the 144 trading days where the Gold/Silver Ratio stayed above 80.
There is only one instance where the Gold/silver ratio was trading above 100. It happened on the 21st of February 1991. On that day gold reached a 7-month low of $357.50 and silver fell to $3.55 an ounce – the lowest ever since January 1974. The price of silver has risen to double digits by the late 90s, but it was only in April 2011 that the price reached its all time high of $50 an ounce.
Looking closely at recent prices, silver averaged $15.70 an ounce in 2018. It is expected to rise by 3.7% in 2019 to reach the average point of $16.28 per ounce. According to some analysts, the as the global GDP slows down, the demand for silver will come more from industrial buyers.
The price of silver could be positively affected by the US money market rates and the strengthening of the US dollar. It is expected that silver will trade for at least $12.75 and peak at $14.90. However, this may the highest price that we will see this year. The reason for not making astronomical growth is that there was a large surplus from 2018 and the demand for new products is low.
According to a report by LBMA affiliated analysts, the gold/silver ratio for this year will be 79. Using this as a basis to forecast the price of silver, analysts believe that the price will be $16.28 – $17.50 an ounce. This rise in the price of silver can be attributed to geopolitical tensions and the instability of governments. People will see silver as a safe haven investment. One should keep in mind that the prices of silver and gold are intertwined. So, wherever gold goes silver follows futures and right now it is on an upward trajectory.
Sources:
https://www.bullionvault.com/silver-guide/gold-silver-ratio
RSS Feeds