The analysts noted that silver prices are much more volatile than gold, which has attracted many shorter term investors and traders to silver.
“In addition, gold has traditionally been a long term investment for conservative investors hedging their portfolios against worst case scenarios,” ETF Securities said. “An additional key factor that helped drive the silver price sharply downwards in May was the fact that global growth indicators were weakening and silver tends to be much more strongly affected by the business cycle than gold as approximately 50% of annual demand comes from the industrial sector (compared to around 10% for gold). With sovereign risk issues unlikely to go away any time soon, global growth still weak and the Fed hinting at the potential for some form of ‘QE3,’ gold currently would appear to have more fundamental support than silver did in May.”
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Full disclosure: Tom Lydon’s clients own GLD.