The price of a Canadian silver coin at precious metals retailer Degussa rose sharply to 17.59 euros on Thursday. The coin-shaped silver ounce, adorned with the Canadian maple leaf and the profile of the Queen of England, reached its previous annual maximum price. And the kilobars of fine silver have exceeded the mark of 500 euros.
On the commodities market, the price of silver is currently more than 14.50 euros per ounce, reaching an annual high. Only on 27 February had the price briefly been more expensive when it temporarily shot up to 14.94 euros. However, this level could not hold the price until the close of trading and quickly became cheaper again.
Silver coins such as the Canadian “Maple Leaf” or the “Vienna Philharmonic” are popular with savers who want to invest in precious metal but shy away from the high prices for gold coins or ingots. By comparison, a fine gold coin with the mass of one ounce, such as the popular South African Krugerrand, currently costs around 1300 euros and is therefore worth 76 times a silver coin.
Silver is therefore jokingly referred to as “gold for the poor“. In fact, the price of silver often follows the price of gold – but not always. According to New York-based wealth management company WisdomTree, movements in the price of gold and silver have a correlation of 80 percent. When the price of gold rose 10 percent in June, silver rose only 6 percent. Sometimes the movements are even opposite. If you want to imitate the development of the more expensive gold with the cheaper silver, you can also be wrong.
The Gold for the poor
Incidentally, unit prices for coins and ingots only play a role in physical purchases. If you invest elegantly in gold or silver securities on the commodity markets, you don’t have to worry about denominations. But gold and silver in particular are all about many investors owning the investment products physically. Because with coins and ingots, many people want to hedge against economic crises or currency reforms – and in these extreme scenarios, independence from the financial industry counts. Anxious people follow the motto: Safe instead of depot.
Commodity expert Nitesh Shah, of wealth manager WisdomTree, expects the silver price to continue its rally but is not expected to fully open up to the gold price. Gold has already risen significantly, mainly due to growing global conflicts and uncertainties. The drivers here are the US-China trade war and the tensions between Iran and the United States.
According to WisdomTree’s forecast model, the price of silver per fine ounce is expected to rise from 15.30 dollars at the end of June to 17.00 dollars in December. Subsequently, a decline to 16.50 dollars is expected by the end of June 2020. On a year-on-year basis, WisdomTree sees the price of silver up almost seven percent. Gold, on the other hand, is only rising by five percent, according to the asset manager.
Silver and business cycles
Those who buy silver coins or bars at the counters of German banks or in domestic precious metal trading on the basis of such forecasts must also keep an eye on the exchange rate of the euro against the dollar.
Why do the prices of gold and silver develop differently and sometimes even in the opposite direction? Gold is not only used for investment and crisis protection, but is also in high demand by the jewellery industry. The demand of the jewelry manufacturers depends on the season. Demand is increasing regularly before Christmas, the Chinese New Year or the Indian wedding season.
Silver is also not only used for investment products such as ingots or coins. According to WisdomTree, half of the precious metal goes to industry, especially the electronics industry. And industrial silver demand depends heavily on business cycles. If the mood in the industry is clouded by the fear of the trade war and the concern about international conflicts, this usually speaks to a falling demand for silver.
What is the silver forecast for Q3 2019 ?
According to the Ezra Moldala from Etoro broker: “Silver can reach $19 per ounce in Q3 since all technical aspects are bullish as we speak.”
According to BusinessInsider.com, we can expect Silver to reach all time high above $26 before the end of 2020.
Original source: Frankfurter Allgemeine Zeitung