Is There More Upward Pressure For The Silver Price Than In Gold?

Tuesday, December 27, 2016

silver and gold

By now gold investors have read all of the year-end summaries about precious metals. But at some point, there comes a time when you need to consider that other precious metal…and whether it might have more room to move upward. We’re talking about the price of silver. But while silver does seem to have room to move upward in 2017, the real question is:  Is there any upward pressure for the white metal and, if so, from where is it coming?

Let’s look at the potential trigger points where silver may increase its price in 2017:

Room In The Gold-Silver Ratio

Typically, the ratio of gold’s price to silver’s price is much lower than it is now.  In fact, in the 18th century, the price ratio was fixed at 15 to 1. (For comparison, if silver lived up to that price in today’s terms, it would break its record and settle at about $75 an ounce).

The current gold to silver price ratio is actually closer to 71:1, which regular readers of this space will recognize as historically high. Although that doesn’t mean that the price of silver is due for an automatic upward correction, it does suggest that silver is currently a smart buy if you’re looking to get into precious metals for the long run.

The reason so many investors turn to the gold-silver price ratio is that historically, the two metals lose very little value. It’s in the economic swings and currency strength that their prices move so much. If silver has a lot of room upward in a historic ratio like this, it’s very intriguing.

Demand For Silver: Up In 2017?

Of course, we can’t ignore the basic laws of supply and demand. Higher demand puts upward pressure on the price of silver because more people are looking to get their hands on it. Economic Times finds that there may be some increased demand for silver in 2017…thanks to its usefulness in solar energy and electronics, both of which are innovative industries with high ceilings of potential. The more people turn to solar energy, the more the solar sector will drive demand for the white metal.

In fact, many people like silver over gold because of its usefulness in industrial purposes. Gold has its uses too, but thanks to its high value and its physical properties, tends not to see as much industrial demand.

Stocks And Economic Factors

There’s currently some downward pressure on precious metals…thanks to the success of the stock market and the push of the Dow Jones Industrial Average toward the psychological benchmark of 20,000. No crash is guaranteed after that all-time high, of course, which is perhaps why so many are avoiding the hedges of silver and gold. But silver is and will remain a hedge for investors who want to diversify out of the stock market…and find some safety net for their respective nest eggs. Just like gold, silver provides a way out. Hopefully, we won’t need it in 2017. 

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.