Silver is one of the most taken-for-granted of the reserve assets. It is not customary for investors to concentrate so much on silver, as gold and other currencies are there to meet their Bitcoin Storm expectations. However, investors are now flocking to the forgotten precious metal. This is after silver traded for a maximum of 7 years.
It is well known that gold is the favorite of investors when considering a safe-haven asset. Since, historically, gold has been considered a more relevant asset than silver itself.
However, the benefits that silver provides are forgotten. But, now that silver has traded at a seven-year high, investors seem to have recovered their memory.
Reflection of the day: Silver calls silver
Why are investors turning to silver?
Investors tend to turn to gold when bonds offer flat or negative returns and stock markets are choppy. This has certainly been the case during the coronavirus crisis, when the price of gold reached record levels.
However, silver has experienced even greater percentage increases in recent weeks. Since silver traded at a seven-year high.
„It looks like silver is going for the gold medal,“ said Mobeen Tahir, associate director of research at the supplier of quoted products Wisdom Tree.
The reasons for this effect are directly related to three factors according to Ole Hansen, head of commodities strategy at Saxo Bank, in an interview with CNBC.
The first is the injection of more money into the economy by central banks around the world. As part of the attempts to stop the impact of the coronavirus crisis and to recover the world economy.
The second factor is that it has resulted in real yields going into negative territory. This is directly related to the opportunity cost, as investing in these metals indicates a lower opportunity cost.
Finally, the third factor is the weakness of the dollar. This is because commonly commodities are traded in dollars, a weaker dollar often translates into a stronger commodity price.
Silver yields the same as Bitcoin in 2020
Silver price to date
At the time of writing, the Silver ounce in cash is traded at US$ 27.65, after having touched a maximum of 7 years ago to US$ 29.39.
It has since receded slightly, but is still in a good position per ounce. This represents a gain of almost 39% since mid-July, when the precious metals rally was in full swing.
Hansen said this monetary easing had created greater uncertainty about the health of the financial system, with concerns about „more accumulated debt that needs to be addressed,“ driving demand for precious metals as a safe haven investment, he said.
Investors and traders are turning to silver as a more practical strategy. However, there is a risk as a result of these central bank leverages on metals.
Can silver’s performance continue in this way?