Gold News

Silver Prices Test $17 as Gold Falls Through $1700, Ratio Holds 100 for 2nd Day

SILVER PRICES fell with gold in the global storage and trading hub of London on Wednesday, slipping 1.2% for the week so far as the dearer precious metal fell 2.0% to hit 2-week lows.
 
Gold dipped beneath $1700 per ounce for the first time since mid-May as major stock markets rose yet again amid further relaxation of Covid-19 lockdown rules worldwide.
 
With silver prices down 1 cent through $17.00 per ounce, that kept the Gold/Silver Ratio of the two formerly monetary metals' relative prices just below 100 for a second day running.
 
Prior to March 2020, the Gold/Silver Ratio showed a daily average of 57.7 across the prior half century, briefly dipping to 14.0 at New Year 1980 and peaking above 100 for just 1 day in February 1991.
 
Over the last 12 weeks in contrast, that ratio of gold to silver prices has now averaged 109.0, peaking at 123.3 on Thursday 19 March as gold prices sank by $200 from 1 week before but silver fell faster, down $5 to set its lowest London benchmark since April 2009 at barely $12 per ounce.
 
Chart of gold/silver ratio, daily London benchmarks. Source: BullionVault
 
Yesterday saw "a sweeping wave of optimism across global markets," says one London bullion market-making bank in a note, making it "a down day for gold as its relative safety [was] not in demand.
 
"Other precious metals also suffered but silver prices performed relatively better than the others...underlining its speculative aspect and the current risk-on sentiment sweeping markets."
 
"Once gold has somewhat run its course and starts to look expensive," MarketWatch quotes brokerage Marex Spectron's David Govett in London, "a lot of people turn to the cheaper counterparty, namely silver, which has attracted fund and investor money."
 
Even as silver prices slipped on Wednesday, Comex silver futures today continued to show a premium for New York settlement over London physical prices, offering sellers an extra 40 cents per ounce against 'spot' for July settlement, now the most active futures on the CME's platform.
 
That rising incentive for shipping metal west across the Atlantic repeats what gold trading saw through March and April, with New York offering a premium to London spot which pulled metal into East Coast depositories from London.
 
Comex-approved warehouses in and around New York ended Tuesday holding 9,656 tonnes of silver, slightly less than they reported at New Year.
 
The giant iShares Silver Trust (NYSEArca: SLV) – by far the world's largest exchange-traded silver investment fund – has meantime swollen by 25% so far in 2020, now needing a record 14,117 tonnes of bullion to back its value.
 
Together with Comex warehouse stocks, that now equates to more than 95% of total global silver mine output for 2020, forecast at 24,800 tonnes by analysts Metals Focus.
 
Excluding the UK-held portion of the SLV's backing, London's specialist bullion vaults meantime held a further 101% of annual silver mine supply at end-January according to the latest data published by trade association the LBMA.
 
"The structural surplus that has been in place in recent years for silver continued in 2019," says the Silver Survey 2020, produced by Metals Focus for the Silver Institute, with the last decade seeing annual surpluses "in seven out of its ten years, resulting in a cumulative increase in global above-ground bullion stocks of 7,905 tonnes.
 
"This excludes the official [central-bank] sector, as well as retail investors' coin and bar holdings, which together rose by 72,312 tonnes over the whole decade."

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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