Despite silver lower relative value compared to gold, it is an element that has greater versatility, since it works both as a precious metal and as a raw material for a large number of industries, which allows it to maintain its value. both in times of market crisis (as a precious metal, which is a safe haven), and in times of prosperity (it is a key industrial metal for sectors such as electricity, electronics and photovoltaics). In this post, we are going to analyze the keys that make this metal one of the most interesting investment options for 2021.
The metal started 2020 slightly above the modest price it had held for the past three years: on January 2 it was trading at $ 17.925 an ounce on the London Bullion Market Association (LBMA); on December 31 it closed the session at 26,485 dollars an ounce, after having reached an annual maximum of 28,885 dollars an ounce.
This represents an annual revaluation of 47.75%, which is practically double that of gold, which was around 24% in 2020.
In the first months of 2021, the path of silver, far from retreating, has continued in an upward trend. On February 1, in the heat of the action by retail investors coordinated on Reddit, the price of the metal soared to $ 29,885 an ounce, a level that had not been reached since eight years earlier, on February 19, 2013, when reached $ 30.
Even so, these levels are far from the historical maximum that silver registered, in the week of January 14, 1980, with no less than 44.91 dollars an ounce.
The status of this ratio is used by investors and analysts to determine the possible overvaluation or undervaluation of silver relative to gold. Thus, the historical minimum ratio was registered in 1980, with 15: 1, that is, 15 ounces of silver were equivalent to one of gold. Evidently, at that time silver was at its all-time highest price, so it took fewer of them to equal the value of a gold one.
On the other hand, during the month of March 2020, at the beginning of the pandemic in Western countries, the fall in the price of precious metals caused the ratio to grow to its historical maximum so far, 125: 1.
Experts point out that the normal level of this ratio between gold and silver should be between 40 and 80: 1 . Above 80, silver would be undervalued relative to gold. And below 40, it would be overvalued.
At the time of this writing, the ratio had stabilized around 66: 1, close to the perfect median level, offering a prospect that silver is recovering the value it has historically had relative to gold.
The good prospects for silver in the year 2021 also contribute to the state of its demand. According to a recent report by The Silver Institute, it is estimated that the demand for silver will grow to 1,025 million ounces (31,886 MT) in 2021, which would be its highest figure in the last eight years.
Investors’ increased demand for physical silver will contribute to this figure, which is estimated at 257 million ounces (7,993 MT), the highest in the last six years.
Bullion and bullion sales figures from the world’s leading mints support this growing investor interest in a more affordable safe-haven asset with enormous potential to appreciate like silver.