Market Update | Silver & Gold
The precious metals market is at a standstill as of late, but there are notable glimmers of hope on the horizon. Continue on for this month’s precious metals market update and what to watch for in the coming months.
The gold-silver ratio is a simple calculation—it’s the amount of silver it takes to purchase a single ounce of gold. So, if the gold-to-silver ratio is 50 to 1, it would take 50 ounces of silver to buy one ounce of gold.
50 to 1 is considered a relatively low ratio. When silver’s number starts to get higher—meaning, silver prices drop and it takes much more silver to buy an ounce of gold—it becomes a clear signal for investors.
Investors are now watching the silver market closely. The gold-silver ratio recently tested 89—the highest level since 1993, according to Kitco News. The low price of silver may be signaling a coming correction—and Peter Hug, global trading director of Kitco Metals, agrees.
“I think south of $14 [an ounce for silver], there’s going to be extreme interest in the market from the retail public. And if that happens coming into June, July, when the refineries and the Mints, i.e. the U.S. Mint and the Royal Canadian Mint, tend not to have peak production, that tends to spike premiums, so there could be some fireworks coming this summer,” Hug said.
Trade Tensions and Gold
As if late, the gold market has been less than impressive. Investors are left waiting for action as gold has remained in a standstill. There is a clear shortage of faith in the precious metals arena overall, but a disappointing performance has ushered gold into the hot seat.
But despite the disconcerting numbers, precious metals experts like UBS precious metals strategist Joni Teves still have their hopes high. Teves is still maintaining a strong outlook for gold to average $1,325 an ounce this year.
One element that has precious metals investors hanging on a positive outlook are trade tensions. The United States and China are in the midst of a trade war, and these circumstances tend to drag on and are not easy to win. As tensions unfold, gold and precious metals tend to benefit from economic uncertainty. But in the near-future outlook, Teves is not sure that tensions will have a substantial impact on gold.
"Our economists note that higher tariffs would result in a 45bp drag to global growth. However, at the moment, these concerns do not seem urgent enough to warrant a rush towards building positions,” she said. "The data has been tracking positively of late, offering some reassurance in the face of renewed trade tensions. Very early readings of global growth indicators suggest a run-rate of 3% in Q2. Lower rates are also acting as a cushion here alongside a more dovish policy stance among central banks. All these factors appear to be containing the extent of a risk-off move, and therefore also keeping gold interest as a safe haven subdued."
If tensions further escalate, it could produce safe haven interest quite quickly. Future action will give greater weight to the effect of the US-China trade war on precious metals.
Curious about gold, silver, or other precious metals as investments? Reach out to us at Jaggards—we’re Australia’s leading dealer in bullion.