Silver futures were up 25% in July, the second-biggest monthly gain for the white metal on record.
And silver is still significantly undervalued compared to gold.
The spot price of the white metal gained even more than silver futures last month. When gold pushed above its previous record price last week, silver went along for the ride, rising to nearly $26 an ounce. It has settled back and is currently trading in the $24 range. On June 29, silver closed at just over $18 an ounce. That’s a 33% gain on the month. Going back to March, the white metal was below $12.
Former US Mint director Ed Moy told MarketWatch silver is going up for the same reason as gold.
What is driving gold prices now are mainly the fear of inflation due to the magnitude of the monetary and fiscal stimulus worldwide, and the flight to safety due to the uncertainty around how and when the global economy will recover.”
Moy pointed out that the silver-gold ratio remains historically wide. That means either gold is overvalued or silver is undervalued. If silver is underpriced, “there is a lot of money to be made,” he told MarketWatch.
Given the economic dynamics, it seems far more likely silver will climb to close the gap rather than the price of gold dropping.
The silver-gold ratio is simply the number of ounces of silver it takes to buy one ounce of gold. It has been historically high for months. It was well over 100–1 back in March. It’s dropped to about 81–1, but that is still high by historical standards. The modern average over the last century has been between 40 and 60–1. In essence, the wide silver-gold ratio is silver on sale.
Ross Norman, CEO of Metals Daily, told MarketWatch “It has been clear for some time that silver was excessively cheap compared to gold.” He agreed that the ratio is still historically high, “suggesting there is scope for greater gains in silver still.”
Source: SchiffGold
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