Sat, May 18, 2024

The price of silver will exceed that of gold in the long run

Silver prices up

Silver will drop in price in the short term, according to Georgette Boele, a well known Dutch analyst of the precious metal market at FXStreet. Specifically, the precious metal’s prices will drop in a short time. However, in the very long run, it is possible for the rise in the price of the metal to exceed those of gold again. Gold prices today fall for first time in three days

The analyst thinks that lower prices of silver are predicted because of a risk-free environment. On the other hand, there is a lower expectation for the demand for the metal. After the world economy recovers from the financial crisis the coronavirus pandemic has brought us, silver prices will outperform gold. 

Economic recovery will bring back the industrial demand for silver

According to Boele, there are two situations where investing in the white metal is more attractive than gold. First, industrial demand is higher for silver than for gold. If global growth picks up, there is more industrial demand for silver, which supports the price of the white metal. In this environment, silver prices will likely increase.

Investors currently expect the economy to rebound considerably as governments worldwide eased the containment measures against the coronavirus outbreak. 

Besides, the metal prices are on relatively attractive levels compared with that of gold. In March, gold was 127 times more expensive than silver. In early June, gold was 95 times more costly than silver. The long-term average gold/silver ratio is around 60. There is more room for the white metal prices to exceed gold prices, but this will take time, the market researcher states. 

Demand for the metal remains weak in the short term 

In the short term, several factors could ruin the party for silver prices. For starters, investors don’t seem to be priced on the earnings scale. The recovery is likely to be slow rather than V-shaped. A downward adjustment in the metal demand expectations will weigh on silver prices. We also expect another shock wave for risk in three months. Investors are likely to close some of their positions. Investors’ positions in exchange-traded funds are on a new record. Another factor that could reduce the demand for the metal is the tensions between the United States and China, Georgette Boele concludes.

Silver prices were up by 0.3% and settled at $17.44. However, a stronger dollar and optimism over a potential remedy for coronavirus pressured gold prices. The precious yellow metal dropped by 0.7% and closed at $1,715.27 per ounce.

 

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