When it comes to precious metals, gold is often the more popular investment. This is no surprise as of late, given its rapidly rising stock value amid COVID-19. Despite the pandemic’s effects on the global economy, gold’s steadfastness seems to be the hot topic of the moment. But look beyond gold and you’ll find silver is enjoying a very similar trajectory.
Since March of this year, the price of silver has surged from £9.61 ($12.35) per ounce to £18.41 ($23.83) at the time of writing. This followed on from a significant drop; due to the uncertainty of the approaching pandemic, stocks of all varieties plummeted. Silver was no exception, and the stock hit its lowest value since 2009.
This low, however, was followed by a huge rally that rocketed the stock to its highest level since 2013. Within weeks, the stock had seen an eleven-year low and a seven-year high. Why the sudden price surge, then?
Times of crisis
Silver is a classic safe-haven venture during uncertain times. Historically, during difficult global events – recessions, market turbulence, political issues – investors flock to gold and silver. The coronavirus has been no exception. To add to that, silver has a much smaller market size than gold, so the weight of large investments will always have a greater impact on its price.
Another factor playing into the price surge is the dollar being the world’s reserve currency in the stock market, its value often correlating directly to gold and silver. With the recent stimulus packages offered by the U.S. government and the dollar trending down, this explains – and bodes well for – silver’s price currently and going forward.
While silver stock tends to fluctuate in direct correlation to that of gold, interestingly, its relative volatility has allowed it to outperform gold at every spike. For example, gold has seen a performance increase of +14.67% in the last six months, while silver has seen a gigantic growth of +52.24% overall.
The adaptability of silver
What separates the two metals, and perhaps makes silver a more viable asset, is that gold’s value comes mostly from jewelry and as a currency proxy. While some of silver’s value is also tied up in jewelry, half of all silver is purchased for industrial use.
These uses include the production of solar panels and batteries – which is a giant green tick for silver’s long-term price – an assortment of electronics and as an antibacterial element. The use in solar panels alone is a good omen; the market for sustainability is expected to triple in the next few years, meaning silver will be in increasingly high demand.
How high can it go?
In the face of these recent price increases, FXEmpire projects an incredible target of silver from anywhere between £105 ($135) and £166 ($213) per ounce in the next six months, if not even higher. That’s a ridiculous rally of more than 700% – a once-in-a-lifetime occurrence.
More conservatively, GoldSilver predicted back in June a 2020 high of £15.60 ($20) per ounce with no crisis and £19.49 ($25) with the crisis. Both of which the stock has surpassed. They did predict, though, a potential five-year high of £80-£116 ($100-$150).
These are two contrasting predictions, but the general consensus is an overall increase in silver’s future.
With this, it seems that any silver asset, be that physical or in mining stocks, could prove to be a wise addition to anyone’s portfolio (if silver’s price continues to rise, mining companies can offer higher percentage gains than Designated Contract Markets).
Although no asset is without risk, and silver is highly volatile, its uses in the industry make an excellent case for silver’s viability. That's why silver could represent an excellent investment opportunity.
