Is The Silver Price Still A Bargain?

Friday, May 20, 2016

Shutterstock-S-Silver-back-SMALLsilver prices

It’s no secret that the price of silver has made it an attractive investment in 2016. Not only has the precious metal performed well during the year, but its value relative to its historical ratio to gold has suggested that it has plenty of room in which to move upward. But, simply because the price of silver has shown signs of life in 2016 doesn’t necessarily mean that the metal is still a bargain, does it?

In order to answer this question, we’ll take a look at recent developments and analysis for silver and ask if the price of silver justifies being more of a “silver bug” than a “gold bug” before summer.

Seeking Alpha Says It’s Too Late

Seeking Alpha isn’t the silver bug that it once was, saying that the gold/silver ratio is no longer as attractive as it was a month ago, that there’s too much uncertainty ahead for the metal, and that we have to review Federal Reserve policy before making any big decisions on silver investments.

Sourcing the following chart from gold price, it’s apparent that they at least have a point when it comes to the gold and silver ratio:

But if you ask me, a ratio of 74 is still pretty darn high - especially considering the historic context of the gold and silver price ratio. It might not be what it was earlier this year, but if there’s still plenty of movement left to reach old historical levels, investors have the context to believe that silver may continue to make its push upward.

As for uncertainty with Federal Reserve policy - it’s a point well-taken. Any investor interested in precious metals will want to keep an eye on the Fed, especially with an important milestone in June (the end of the next quarter).

Silver Isn’t The Only Way To Invest In Precious Metals

Owning physical silver is one thing, but if you were smart enough to make investments in silver stocks earlier this year, you’ve likely seen your portfolio benefit from tremendous gains. News.markets points out that silver stocks are outperforming the precious metal, perhaps a sign that investors might not be willing to purchase a lot of silver bullion; it’s not as efficient as gold, after all, when it comes to storing value. With some stocks up about 200%, and silver only up around 20% depending on which day you’re talking about, perhaps there’s some upward mobility for the price of silver bullion.

Money Morning gives an excellent rundown when it comes to silver price basics: supply, demand, Federal Reserve policy, and more. And Money Morning believes that the price of silver will continue to go up. As of the writing of this article, silver is trading at about $16.49 per ounce, still up on the year, though down from its recent highs. If this current dip is only a blip on silver’s ascent to $20 and beyond, perhaps now is the time for silver bugs to make their move.

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.