Market Watch: Why Silver is Trading at a Nearly 4-year High

Article by Myra P. Saefong in The Wall Street Journal Market Watch

Silver futures on Monday marked their highest settlement in nearly four years, buoyed by a sharp climb in investment demand as the metal continues to play catch up to gains by sister metal gold.

“Trading in the gray metal is worth barely 10% of what gold sees each day, so hedge funds and other money managers wanting to catch up with the yellow metal’s jump towards new all-time highs might expect to get more bang for their buck in silver,” said Adrian Ash, director of research at BullionVault.

There has been a historically high purchase of physical silver in the past few months alone, said Peter Spina, president and chief executive officer at GoldSeek.com. “Never in the history of silver have we seen such demand for [the metal] in such a short period of time.”

“One of the best value indicators is the relative value of silver to gold,” he said, pointing out that during extremes in the market selloffs, the ratio of gold to silver could spike to around 130 — meaning that it would take 130 ounces of silver to buy one ounce of gold. That ratio is now back under 100, but that figure should be closer to 50 instead, he said. “Even at a 50 ratio, silver is far removed from the ratio found naturally,” said Spina, as silver is found at a ratio of nearly 20 ounces per ounce of gold.

Ash pointed out to MarketWatch that silver has jumped from its COVID-19 price crash to an 11-year low in mid-March by 58% in just 80 trading days. That puts the March to July 2020 performance in the “top 4% of all four-month gains over the last half-century,” he told MarketWatch. Even so, silver has outpaced this current surge many times — in 1974, 1979, 1982, 1987, 2010 and 2011, which all marked times of extreme economic or financial stress, so “when silver gets moving, it can really move,” he said.

“The number of private individuals seeing stability and diversification with precious metals has never been greater,” with silver holdings on BullionVault up by 26% so far this year, versus 11% growth in gold, Ash said.

In the coming years, with gold moving above $2,000, Spina sees silver “revisiting its non-inflation adjusted highs of $50” and potentially higher, with $100-an-ounce silver “not ...

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