Silver prices are latching onto gold’s rally, reaching their highest levels since 2016 on Monday, as concerns about the global economy and market dynamics continue to shift investor attention towards safe haven metals.
Spot silver advanced 4.3% to $19.90 an ounce by 4:00 p.m. EDT, while silver futures on the Comex exchange surpassed the $20 an ounce mark for the first time in more than three years, rising by advanced as much as 2.7% to $20.34 an ounce.
Elsewhere, gold for August delivery climbed 0.4% to $1,818.40 an ounce.
Silver, which just completed its best quarter since 2010, is getting an extra boost from concerns about the metal’s supply and bets on increased industrial demand for the metal, used in solar panels and other manufactured products.
Of 275 mining operations disrupted by the covid-19 pandemic around the world, the most affected were gold and silver mines, according to a report by S&P Global Market Intelligence. In Latin America, where much of the world’s silver is produced, the situation has worsened, with Mexico recently overtaking Italy in the number of virus-related deaths.
“Silver will continue to be pulled higher by the strong gold price and supportive financial conditions,” Morgan Stanley said in a second-half outlook that listed the precious metal as its no. 2 pick after copper.
“As real demand also recovers through the second half of the year, this will add further impetus to silver’s price, narrowing the gold-silver price ratio slightly.”
Morgan Stanley
Silver futures have climbed more than 40% since the end of the first quarter, surpassing the 14% gain for gold futures during that time. As silver prices have rallied, investors have been piling into exchange-traded funds backed by the metal, echoing a trend seen in gold. Global silver-backed ETF holdings rose 21% during the second quarter and hit a record this month.
Based on Monday’s prices, it would take about 92 ounces of spot silver to buy one ounce of spot gold, a ratio that is higher than the average of about 69 over the past decade. Some analysts said that suggests further gains may be in store for silver:
“Silver is currently trading at close to a record discount to gold, which should attract demand,” Goldman Sachs Group Inc. said in a note this month. “Silver often tends to lag gold at the beginning of a precious rally, and catch up to it as the rally continues and investors look for ways to diversify.”
Just last week, analysts at RBC Capital Markets raised their silver price forecasts by 16% in 2020, 17% in 2021 and 14% in 2022.
(With files from Bloomberg)