Silver Price: Is Silver a Quality Alternative to Cryptocurrencies?

Thursday, September 28, 2017

silver coins

The recent price movement in precious metals has been a bit up and down—which isn’t surprising, given where the economic headlines have been. It appears just about every investment class has seen its share of optimists and pessimists lately. That’s just as true with cryptocurrencies, a popular alternative and electronic hedge, which has seen wild swings despite high prices lately. But how does it stack up against silver when it comes to hedging against the world markets? Let’s take a closer look:

Gauging the Recent Performance of Silver

To draw the comparison, let’s find our baseline in silver’s recent performance. Take a look at the chart below, courtesy of APMEX.com:

You’ll note this give us a three-month range, since the end of June. After a brief dip early in July, when silver moved to under $16 per troy ounce, silver steadily grew until a peak in early September, where it moved around $18 per troy ounce. Silver has since settled down, tracking movements in the U.S. dollar and echoing where gold, its precious metal compatriot, has since moved.

What does this mean for silver’s current context? The precious metal still seems to have a strong bottom, refusing to go much farther below $16 per troy ounce. But it’s also waiting for a breakout performance, and there’s no telling from where that might come. Now let’s move to cryptocurrencies.

A Chart of Bitcoin’s Recent Performance

This chart comes courtesy of WorldCoinIndex.com:

Truth be told, the chart looks very much like the chart we saw for silver. This may suggest a correlation of sorts—that both precious metals and cryptocurrencies are seen as hedges from challenging geopolitical headlines and worry in the stock market. But is that truly what’s going on? Let’s take a closer look at the relationship between precious metals like silver and cryptocurrencies:

Are Cryptocurrencies Taking Some of Silver’s Thunder?

In the world of market hedges, precious metals have a prominent place. But the ability to park money in cryptocurrencies has put silver bugs and lovers of BitCoin at odds: which is the best hedge against the market?

Seeking Alpha recently asked it bluntly: are cryptocurrencies killing the demand for silver? Is that one reason silver seems to have trouble breaking through its recent barriers? They note that silver has not gone up past $19 per troy ounce despite strong performances out of gold in 2017.

If cryptocurrencies are indeed driving demand away from precious metals, it’s entirely possible that this impacts silver more than it does gold. Investors love to flock to gold because it’s very valuable and an easy store of wealth. Silver has more industrial uses, but its lesser value means that storing physical silver is more difficult.

Given the correlation we’ve seen with precious metals and cryptocurrencies as of late, it’s possible we simply need more data to gauge whether or not cryptocurrencies are taking thunder away from precious metals. But it remains clear that precious metals still stand to gain whenever the U.S. dollar loses strength or worry about the stock market sends investors hedge-seeking.

 

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.