While silver can present more use cases than gold, its prices have fallen into negative territory for 2021, but analysts are optimistic that 2022 could paint a more aesthetic picture.
“Silver had no life of its own this year, fluctuating merely in gold’s slipstream. On balance, it suffered disproportionately high losses as compared with gold. As a result, the gold/silver ratio has climbed from a good 70 at the beginning of the year to over 80 now,” said Commerzbank analyst Daniel Briesemann, via a Kitco News article.
As mentioned, silver has uses cases aside from being a store of value like gold. That same narrative will run into 2022.
“Silver is a hybrid. It’s a precious metal with a role as an inflation hedge, but it’s also an industrial metal that has a lot of different applications,” said Ned Davis Research (NDR) chief global investment strategist Tim Hayes. “We’ll see that maintained. Silver made a multi-year low in 2020. And as much as it’s been weak recently, it’s still above the 2014 and 2019 lows, and it’s making higher lows.”
Silver prices have seen better days, but it’s accustomed to this type of volatility. While its movements may mirror those of gold, it presents a better value option for investors looking to get precious metals exposure.
“Silver prices collapsed in Q1 2020. We saw effectively a once-in-a-century event where the gold-silver ratio went to over 110. Since then, silver has roared in the last nine months of 2020. It was natural that if gold was going to pull back, silver was going to have a breather and a bit of a correction as well,” said Perth Mint manager of listed products and investment research Jordan Eliseo.
“The gold-silver ratio now is a lot healthier. It’s basically at 80:1. It’s nowhere near the extreme that we saw in March 2020. Anytime the ratio has been 80:1, silver began to look relatively cheap,” Eliseo said. “If you go all the way back to the middle of the 1970s, there’s only been a couple of times where silver has been cheaper relative to gold than the roughly 80:1 ratio.”
Getting Physical Silver Exposure
One way for investors to get exposure to silver is via the Sprott Physical Silver Trust (PSLV). PSLV is a closed-end fund that lets investors redeem large blocks of shares in exchange for delivery of silver bullion.
PSLV often trades at a premium to net asset value (NAV). Closed-end funds can see large premiums and discounts, while ETFs have an arbitrage feature that tends to keep prices much more in line. However, PSLV does possess some unique benefits.
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