Silver’s best streak since the 1970s

Gold has gained around 21% this year and hogged the headlines as it keeps hitting new records around $1,350 an ounce. But silver has done even better, gaining more than 30% and reaching a 30-year high above $23 an ounce. It has risen for seven straight quarters, its best streak since 1974.

Silver is “essentially… a cheap form of gold”, says James Turk of GoldMoney. It benefits from being a safe haven and alternative currency, although it is more volatile, typically magnifying gold’s movements in both directions as the market is very small. But it is also an industrial metal, with industry accounting for about half of overall demand. This characteristic is giving silver added pep at present, says David Rosenberg of Gluskin Sheff. “Burgeoning global demand for solar panels and batteries” is bolstering already solid investment demand.

While a global slowdown could temper industrial demand, investment demand looks likely to increase. Central banks are gearing up for further QE and countries around the world are trying to weaken their currencies. “Nobody wants a strong exchange rate”, so gold and silver are in demand as a hedge against currency debasement, while “intense uncertainty” about the economic outlook means investors are seeking safe havens, says Rosenberg.

The gold-silver ratio (the gold price divided by silver’s) has fallen to 59 but remains above the long-term average of 40, says
Garry White in The Daily Telegraph, so silver still looks undervalued compared to gold. Daniel Brebner of Deutsche Bank thinks silver will reach $26.50 by the end of next year. The Physical Silver ETF (PHSP) tracks the silver spot price.