This month, guest blogger Daniel Fisher of Physical Gold gives us his views and outlook for Silver in 2014.
Silver leads the precious metals race this year with an increase of over 13% since the beginning of 2014. Not only is it at a three month high but its rally has been the longest since 1968.
Yes – we all know that the tax free silver price tracks the price of gold and some credit has to be given to its shiny yellow friend as investors have fled from stocks to a physical safe haven. However – demand for silver in its own right has surpassed any other asset class in 2014 with sales of silver coins by the U.S. Mint almost quadrupling in January to 4.78 million ounces from December.
Analysts and experts have often compared the traditional ratio between the gold and silver price (12:1) to the current one (50:1) to highlight how cheap it has become and that it should be trading at five times its value. Since the beginning of 2014 – the gold price has increased by 7.5% compared to almost double that rate of growth for silver thereby inferring a narrowing of the ratio. I can’t see silver classified as “cheap” for long as investors are starting to cotton on to the fact that if the market requires safety in the face of extremely volatile markets then silver, whilst more speculative than gold, may well produce more of a short-term uplift.
From the beginning of February many global hedge-funds turned bullish on Silver whilst many of the day traders started taking some of their profits by liquidating growth. As a result the silver price has retreated from its high point giving the market the chance to take advantage of the buying opportunity and start investing in physical silver. Billionaire John Paulson kept his holdings of the metal unchanged in the fourth quarter of 2013 and spectators believe he is quietly buying more every month.
A very shaky US economy and toppling UK national deficit is giving the market the jitters. The U.S reducing QE by $10bn every month is starving an economy that has now learnt to rely on it; consequentially equity indices have suffered as a result. I can’t really see what has improved since 2008. We’re in more debt, our currency is weaker, the banks have gaping holes in its balance sheets and there doesn’t seem to be a safe alternative to keeping up with the cost of living.
The number one regret for people that purchase gold or silver is that they didn’t buy 10 years earlier. The gold and silver price has dropped from its high in 2011 by almost 40% from the end of 2013. From what we’ve seen in just a couple of months – people are now starting to capitalise on the buying opportunity and perhaps we’re at the beginning of another 10 year run?
If you want to know more about investing in tax-free silver, please contact Intelligent Partnership via email (enquiry@intelligent-partnership.com)
You can find the original blog post on the Physical Gold website here.