bobbyw24
03-04-2009, 06:27 AM
http://www.commodityonline.com/news/What-gold-Go-for-silver!-15695-3-1.html
What gold? Go for silver!
Commodity Online
MUMBAI: Poor man’s gold — silver — has got more fans in the recent past among investors. The reason is that silver has outperformed gold as far as prices are concerned.
Both silver and gold have enjoyed strong runs recently, but silver has outperformed, with the price rising 30% in 2009 compared with gold’s 11%. This has reduced the gold/silver ratio from 80 to 69, a fall of 13%.
If you notice the pattern of prices of gold and silver, you can find some interesting facts in it.
When gold prices are going up, the gold/silver ratio declines, i.e. silver rises more. When gold falls the gold/silver ratio widens, i.e. silver declines more.
Explanation for this is that the silver market is a lot smaller, and so inflows or outflows of investment money have more of an impact.
Silver has woken up recently, but it isn’t flying yet. Investors prefer precious metals to almost all other investments after more than $1.2 trillion of writedowns and losses at the world’s biggest financial companies sent the global economy into a recession.
ETF flows, however, have been relatively slow for silver in February, at least compared with gold.
At the end of 2008 the three silver ETFs had 8,254 tonnes of silver, compared to the 15 gold ETFs, which had 1,195 tonnes of gold, a ratio of 6.9:1. January saw inflows of 860 tonnes of silver and 105 tonnes of gold, a ratio of just over 8:1.
But February first fortnight has seen inflows of about 420 tonnes to 200 tonnes, a ratio just over 2:1.
Silver mine production is roughly eight times greater than gold’s. So perhaps another reason for silver’s out-performance is that it has a bigger function as an industrial metal than gold, which is regarded as a safe haven.
Investors are buying precious metals as a refuge from the 47 per cent drop in the Standard & Poor’s 500 Index in the past year and growing concerns that treasuries will fall as the US government pledges $9.7 trillion to revive the economy. According to experts, gold may rise 25 per cent this year, silver may jump 58 per cent to $18 an ounce.
Silver is likely to do a catch-up rally soon. There’s a flight to precious metals as a storehouse of wealth. Silver got left behind and it’s been closing in quickly but there’s still a performance gap. The last time silver did better than gold was in 2006.
As far as silver production is concerned, Peru produced 112 million ounces of silver in 2007 and Mexico 99 million ounces, taking their share of world output to 32 per cent.
While investor demand may drive silver to $18 an ounce this year, the returns may not surpass gold. When investors sell silver, it literally collapses because of fewer participants in the market.
Silver is also more vulnerable to the outlook for the economy, because industrial consumption including electronics, batteries and soldering made up 54 per cent of demand in 2007.
What gold? Go for silver!
Commodity Online
MUMBAI: Poor man’s gold — silver — has got more fans in the recent past among investors. The reason is that silver has outperformed gold as far as prices are concerned.
Both silver and gold have enjoyed strong runs recently, but silver has outperformed, with the price rising 30% in 2009 compared with gold’s 11%. This has reduced the gold/silver ratio from 80 to 69, a fall of 13%.
If you notice the pattern of prices of gold and silver, you can find some interesting facts in it.
When gold prices are going up, the gold/silver ratio declines, i.e. silver rises more. When gold falls the gold/silver ratio widens, i.e. silver declines more.
Explanation for this is that the silver market is a lot smaller, and so inflows or outflows of investment money have more of an impact.
Silver has woken up recently, but it isn’t flying yet. Investors prefer precious metals to almost all other investments after more than $1.2 trillion of writedowns and losses at the world’s biggest financial companies sent the global economy into a recession.
ETF flows, however, have been relatively slow for silver in February, at least compared with gold.
At the end of 2008 the three silver ETFs had 8,254 tonnes of silver, compared to the 15 gold ETFs, which had 1,195 tonnes of gold, a ratio of 6.9:1. January saw inflows of 860 tonnes of silver and 105 tonnes of gold, a ratio of just over 8:1.
But February first fortnight has seen inflows of about 420 tonnes to 200 tonnes, a ratio just over 2:1.
Silver mine production is roughly eight times greater than gold’s. So perhaps another reason for silver’s out-performance is that it has a bigger function as an industrial metal than gold, which is regarded as a safe haven.
Investors are buying precious metals as a refuge from the 47 per cent drop in the Standard & Poor’s 500 Index in the past year and growing concerns that treasuries will fall as the US government pledges $9.7 trillion to revive the economy. According to experts, gold may rise 25 per cent this year, silver may jump 58 per cent to $18 an ounce.
Silver is likely to do a catch-up rally soon. There’s a flight to precious metals as a storehouse of wealth. Silver got left behind and it’s been closing in quickly but there’s still a performance gap. The last time silver did better than gold was in 2006.
As far as silver production is concerned, Peru produced 112 million ounces of silver in 2007 and Mexico 99 million ounces, taking their share of world output to 32 per cent.
While investor demand may drive silver to $18 an ounce this year, the returns may not surpass gold. When investors sell silver, it literally collapses because of fewer participants in the market.
Silver is also more vulnerable to the outlook for the economy, because industrial consumption including electronics, batteries and soldering made up 54 per cent of demand in 2007.