Silver is having its best start to a year in over three decades and is headed for a bull market. Experts agree that much of this early success for the precious metal is due in large part to the decrease in global economic growth. Because of this slowed growth, silver havens are in high demand and continue to gain more momentum.
Data from the U.S. government has money managers raising their net bullish wagers to last year’s August highs. And with holdings in exchange-traded products backed by silver posting three straight weeks of gains, an ounce of gold is buying 71.4 ounces of silver. This is a fair signal of a drop in value for the white metal after a decade’s average of about 58 ounces.
Gold prices dropped to $1,300 an ounce, marking the lowest drop since August of 2014. It seems the mixture of collapsing oil prices and growing concerns about the U.S. growth’s ability to offset the global slide has investors returning to precious metals. Stimulus plans are scheduled to be released on Jan. 22 by policy makers at the European Central Bank.
“Silver will benefit from all the stimulus measures and rate cuts being announced aggressively by the central banks,” said Caroline Bain, a commodities economist at Capital Economics Ltd. in London. “The stimulus measures will at some point boost usage of the metal.” Bain also expects silver to reach $20 by the year’s end.
On Wednesday, silver for immediate delivery rose to 0.7 percent, and closed at $18.127. Settling at $18.4064 would have the white metal up 20 percent from last November’s $15.3387, and ultimately hitting bull market standards. With January prices up 15 percent, silver is having its best start since 1983.
“Silver is rising along with gold as a hedge against uncertainties,” said George Gero, a New York-based precious-metal strategist at RBC Capital Markets LLC. “Also, some funds are betting on future growth with so much money being pumped into the system.” Experts are forecasting a growth in consumption to roughly 680 million ounces by 2018, which is 140 million ounces above 2013 marks.
