Silver Price Surge Attracts Investors' Attention

Investors are flocking to silver again after the sharp drop in prices earlier this year. From its low point in March, silver price has already risen more than 40%, putting the precious metal at the top of the list of best-performing precious metals in the second quarter. In less than a week, the price of silver rose by almost 13%, bringing the precious metal back to the level it was at the beginning of this year. This means that silver is performing less well than gold, which is about 15% higher than the price at the beginning of this year.

In March, the prices of precious metals were still Down due to an unprecedented sell-off in the financial markets. In a flight to liquidity, investors sold not only stocks and bonds, but also precious metals. Silver, platinum and palladium in particular fell, because these precious metals also have many industrial applications. Due to the corona crisis and a flood of poor macroeconomic data, the prices of these commodities fell.

Gold once again proved its safe-haven status this year. At the low point of the stock market, the gold price also fell, but the price hardly fell below the level of the beginning of this year. As a result, gold not only outperformed most commodities, but also outperformed the stock market. Below you can see the price development of the precious metals since the beginning of this year. This chart clearly shows that gold is less volatile than the other precious metals.

Price development of precious metals since the beginning of this year

Investors are getting into silver

As a result of the sell-off, the Silver price In March, it reached a low of €350 per kilo, making the precious metal more than 120 times cheaper than gold at the time. Never before has the ratio between the two precious metals been so high. Many investors seized this opportunity by buying silver. By a run on Silver Coins Mints were unable to cope with the demand and delivery times increased. Investors also bought a lot silver bars in combination with storage in Switzerland, where the precious metal is exempt from VAT.

Due to the recovery of the silver price, the gold/silver ratio fell to around 100:1. This means that silver is still relatively cheap compared to gold from a historical perspective, because in the last century the ratio was on average 46:1. Even further back in history, when silver still fulfilled a monetary function, the ratio between the two precious metals was even 20:1. As silver gradually disappeared from coins and governments and central banks sold off their strategic silver reserves, the ratio has continued to rise in recent decades.

Silver was historically cheap against gold in March

Silver vs Gold

Of the annual supply of silver, about 60% is used for industrial applications. The remaining supply will be processed into investment silver and jewellery. Due to this mix of applications, the silver price is quite volatile and often difficult to predict. For example, in a crisis, the price of silver can rise if more investors get into silver, but also fall if industrial demand decreases. In any case, it increases volatility, which makes silver especially interesting for speculative investors.

Gold, on the other hand, behaves mainly like a monetary metal. Only 10% is used for industrial applications, about 50% for jewellery and 40% for investment gold. It should be noted that in many cultures, gold jewellery is seen as a form of savings or wealth. Also buy Central Banks a substantial part of the annual supply of gold. This means that a large part of the global demand for this precious metal is less sensitive to an economic crisis. As the first chart showed, gold is the most stable precious metal. For savers who want to take less risk, this precious metal is therefore the safest option.

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