Is The Silver Price Tracking The Price Of Gold?

Thursday, November 3, 2016

silver and gold

For many silver investors, the reason behind investing in the precious metal is simple: it’s an affordable precious metal alternative to gold. For this strategy to work, however, it’s necessary that the silver price closely track the price of gold. But is that what we’ve seen in the markets lately, or has silver developed a mind of its own?

With the price of gold showing signs of life again with an uncertain market headed into the U.S. presidential election, there may be no better time to evaluate the price of silver:

The Price Of Silver This Morning

Silver, like gold has enjoyed a generally positive year. Currently over $18 per troy ounce, silver has rebounded from its lows in late 2015 and enjoyed a medium resurgence. It’s still got a long way to go if it’s to match its all-time highs, which has silver investors optimistic for the future.

A look at the price of gold in recent years won’t show a direct 1:1 correlation between the metals, but the trends are clear: silver and gold are joined at the hip to the extent that they belong to the precious metal asset class. But does that correlation over the long-term trends translate to a short-term correlation between the two?

A Dip In Gold And Silver Prices Late This Week

Anyone paying close attention to both gold and silver prices will have noticed a dip recently. EconomicCalendar.com notes a plummet in silver prices at about 3.5% from where it was. Thus far this morning, gold is down about $7, or about half a percentage point.

As one might expect, the lower silver prices mean larger percentage swings over gold, but the correlation between the precious does seem to hold up over the past week. Both metals have shown a lot of optimism throughout the week, despite GDP numbers from last week that suggested the metals may be in for a bit of a dip on the news.

Silver’s Reaction To The Stock Market

Like gold, silver is often seen as a hedge against trouble in the stock market. Silver is essentially “Gold Jr.” for many who want to move their money out of equities and invest in something more tangible, while they worry about volatility or even negative interest rates in banks across the world.

With reaction in the stock market currently jumpy, it seems to suggest that both gold and silver may be in a holding pattern throughout the year. DailyFX has some of the short term predictions in both gold and silver prices. Needless to say 2016 has been a year of tremendous upheaval and instability across a range of measurements, not just in the economy. It stands to reason that both silver and gold can benefit from this uncertainty.

For long-term concerns, silver’s price remains a close tracker of gold, as both of the precious metals benefit from optimism in this asset class. Those who believe that silver has even more room for upward mobility may see the investment as even more ripe than that of gold.

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.