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Silver Is Cheap And Has More Potential Than Gold - ETF Securities

Kitco News

(Kitco News) - Although the silver market has struggled to find momentum since the start of 2018, one investment firm is not giving up on the white metal.

In a recent report, Maxwell Gold, director of investment strategy and research at ETF Securities, said that he still expects silver to outperform gold this years, as investors adjust to growing industrial demand due to renewed global economic growth.

The firm reiterated its forecast for the precious metal to trade in a range between $19 and 20 an ounce by the end of the year. March silver futures last traded at $16.65 an ounce, down 0.37% on the day. Currently, silver prices are down almost 2% since the start of the year as the market has been unable to hold a critical psychological level at $17 an ounce.

April gold futures are trading at $1,350 an ounce, up more than 3% since the start of the year. Gold’s outperformance has kept the gold/silver ratio at a multi-year high. Gold added that the yellow metal is currently benefiting from short-term technical momentum, while silver is supported by substantial long-term market fundamentals of growing demand and shrinking supply.

“When you put all these factors together, that paints a very bullish picture for silver,” he said. “I like gold, but I like silver a lot more.”

Because of the high gold/silver ratio and silver prices below $17 an ounce, Gold said that it is only a matter of time before investors start to take more interest in the white metal. He added that current prices represent an attractive entry point for long-term investors.

“People are scratching their heads wondering why silver isn’t picking up along gold but we didn’t see the industrial cycle pick up until the end of last year and beginning of this year. Rising global growth is going to have a much bigger impact on silver going forward,” He said.

Along with growing industrial demand, Gold said that silver could also outperform well on the investment side as investors look for assets to hedge against inflation. Gold is seen as a traditional inflation hedge, but Gold's research has shown that base metals, including silver, show stronger returns in a rising inflationary environment.

Gold added that his research also shows that short-term spikes in volatility benefit gold prices more than silver; however, silver outperforms gold when there is an ongoing correction in equity markets.

“Investors have remained absent in the silver market in recent of years, but if we get further equity weakness, if we get further inflationary pressures and the U.S. dollar remains weak, that is going to be a big tailwind for silver to outperform gold,” he said. “Investors see silver as a way to diversify factor risk exposure while still keeping up with cyclical growth and rising inflation. You get the best of both worlds."

It's not only the demand side of the equation, But Gold also said that dwindling mine supply and continued reduction in above-ground stocks is helping to reduce the overall supply of the grey metal.

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