Silver as an investment

Market Report: Unchanged on the week / By Alasdair Macleod / July 14, 2017

Gold and silver prices steadied this week, with gold up only $3 at $1218 in early European trade this morning (Friday), and silver unchanged at $15.68. As our headline chart shows, silver is now marginally lower on the year, and gold’s rise has been pared to 5.75%. All this has happened against a background of a weaker dollar, so in terms of performance, gold’s rise against the dollar is as good as it gets. Our next chart shows gold’s performance indexed to the start of the year against the four major currencies.


Priced in euros, gold is now down on the year, by 2%. The point is worth making to refute those who buy and sell gold on charts alone: they are ignoring the value gold offers most of the world’s population priced in other currencies. For example, there has been a rebound in Indian demand, with the official figures for May rising to 124 tonnes for the month. Given the smuggling trade, this is bound to understate the true figure. Silver demand also jumped sharply. Chinese public demand for gold in June rose to 155.5 tonnes, which for the first six months now stands at 1,021 tonnes. China and India between them are absorbing gold at an annualised rate of 3,160 tonnes, not far off total global mine supply. For this demand to be satisfied, the rest of the world, including members of the public, central banks and other government institutions such as sovereign wealth funds must draw down on existing above-ground stocks to satisfy their demand. This tells us that serious supply problems must be developing in the physical market, which is confirmed by backwardations for future deliveries.


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