Despite its much lower market profile than gold, silver’s prospects are looking up. The all-important gold-silver ratio is approaching levels reached during the GFC, which subsequently led to a 400 per cent surge in the price of silver. Silver might not reach the same dizzy heights this time, but the metal’s underperformance relative to gold, along with other key drivers like inflation and the US dollar, suggest a fertile environment for price outperformance.
Silver does not experience the same level of investor awareness as gold. For this reason, silver’s prospects often get ignored by the mainstream media and the investment community generally. Gold dominates investor sentiment in the precious metals space, mainly because the metal is more heavily traded and there are many more listed companies offering exposure to gold than for silver.
Silver also tends to be a far more volatile metal than gold, due primarily to its relative ‘cheapness’ compared to gold. This provides investors in silver with more leverage to underlying price movements – which of course a good thing when prices are rising, but less attractive when prices are in decline.
Silver ultimately tends to be influenced by the same factors that move the gold market, but on a somewhat delayed basis. Movements in gold prices tend to be more immediate and significant, whereas silver tends to play catch-up. For this reason, many investors look towards the gold-silver ratio as a means of trying to determine whether there is relative value in the respective metals at any particular point in time.