Lost in the shadow of goldand cryptocurrency, silver quietly gained over 6% in 2017. Even so, the whitemetal was considered an underperformer. Gold was up better than 12% on theyear. But with silver languishing a bit behind gold, there are strongindications that 2018 could prove to be a big year for the white metal.
In fact, according to an article in the Business Standard, mainstream investors have startedbetting big on silver in anticipation of a big price upswing in 2018.
The silver-gold ratioremains historically high. This means silver is undervalued compared to gold.Currently, the silver-gold ratio stands over 76 to1. This means you canbuy 76 ounces of silver with one ounce of gold. Compare that with the historicaverage ratio which hovers around 16:1. The modern average over the lastcentury is around 40:1. As Peter Schiff said in a video over the summer, “This is silver on sale.”
It’s one of the greatestsilver sales of all time, relative to the price of gold.”
The mainstream investmentworld has its eyes on silver as we enter the new year. A Goldman Sachs reportreleased recently was extremely bullish on silver and forecast the white metalto outperform gold in 2018.
Typically, silver tends tooutperform gold at the current state of the business cycle, as it is morestrongly leveraged to global growth, given its significant industry use.However, the relationship broke down post-2011, as priceinduced silver industrial demand to diverge from the growth of thebusiness cycle. Now, we are finally beginning to see evidence of silver industrialdemand picking up with strong global growth.”
The move toward cleanenergy will likely be a boon to silver. China, in particular, continues torapidly increase solar energy production. In its 13th Five-Year Plan, Beijingaims to triple its solar capacity by 2020. Last year ranked as the strongest onrecord for solar-related silver demand.
Silver demand is also onthe rebound in India. We tend to think of India as gold country, butIndians also have a cultural affinity for the white metal. The country is oneof the leading sources of world silver demand.
This boost in demand comesduring a period of tightening silver supply. As we reported in November,two-thirds of the top silver miners suffered significant production decreasesin 2017, according to information released by World Metal Statistics. Throughthe first eight months of last year, silver production in Chile dropped 20%.Australian production fell by 19%. Silver production in Mexico was down 2%.Peru saw a 1% production decline. And China had the biggest drop in mineoutput, according to the report, falling by a whopping 25%.
Considering these basicsupply and demand dynamics, it’s no wonder Goldman is looking at silver. Andits not alone.
Bank of America alsoforecast a good year for silver, predicting gains of around 8% in 2018. A Bankof Nova Scotia report contained similar sentiment, saying thatmomentum indicators are bullish for the white metal.
Silver tends to get lost ingold’s shadow, but it seems more investors are taking a peek at the whitemetal. Back in August, we offered five reasons to buy silver.Withthe silver-gold ratio at such a high level, and basic supply and demanddynamics pointing toward increasing prices in the future, this is a good timeto take advantage of silver at what could be the lowest prices we’ll see thisyear.
in: Peter Schiff