Since international financial markets have become more unstable amid global economic and political uncertainty, more and more investors are fleeing risky assets for safe-haven assets like precious metals. As the result of this tendency, silver prices started a strong rally and quickly set a new 24-month high.
At the same time, some sources report that international investment funds are heavily investing in precious metals. Moreover, their exposure to gold and silver is reaching the all-time high. However, silver prices always move faster than gold prices. Some experts believe that this market tendency is going to be continued over at least over the next couple of months.
The spot price of silver is reported to have reached $21 per ounce. This is the highest price level since 2014. The world’s major investment funds are currently holding papers to the amount of 650 million ounces of silver. This is the all-time high.
Over the last 10 years, the investment funds have been heavily buying silver. The were doing so even when the spot price of silver reached $48,5 per ounce in 2011. Still, in late 2015, silver prices dropped to the 5-year low.
In Singapore, silver prices skyrocketed by almost 7% at a time the other day. Over the same period, gold gained only 1.2%. In Shanghai, silver gained 5,7% over the same reporting period.
Over the first 6 months of the year, the price of silver increased by as much as 47% while gold gained only 27% over the same period. It is important to note that last spring, the gold-to-silver ratio was 1 to 84. At this point, this is 1 to 64. At the same time, companies related to silver mining saw their stocks appreciating.
Apart from being a precious metal, silver is an industrial metal as well. That said, this asset is backed by 2 precious features. Almost 50% of the silver produced today is used for industrial purposes. The rest of the metal goes to jewelers and mints to create jewelry, coins, and bullions.
Brexit Referendum Triggers Silver Rally
A lot of representatives of the international expert community believe that it was the Brexit referendum that triggered the strong silver rally we recently saw. The thing is that after the U.K. announced the results of the Brexit referendum, international investors started withdrawing their capital from British assets, which turned into toxic assets overnight. The spare money was invested in precious metals, mainly in silver. This triggered a strong rally.
The Fed’s uncertainty over the fate of the key interest rate also backed the rally, Masterforex-V Academy experts say. There is a secondary driver. The thing is that 54% of industrial silver is used to build medical equipment and semiconductors.
According to the latest forecast, these 2 industries are expected to see a 3% demand increase while silver mining is expected to shrink by 2% at the same time. On top of that, over the last few years, silver was considerably underpriced. And now may well be the time to restore the price balance, especially when backed by increasing demand from China.
