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Silver: Why it could be a better bet than gold

Its performance has dominated that of gold so far this year

by | July 13, 2016

Gold may be the talk of the commodities world in 2016 but its performance thus far has been outshone by silver—up 46% year to date versus gold’s 26% gain. Here are a few reasons why SmallCapPower believes silver is likely to continue its dominance over gold for the foreseeable future.

Silver: Why it could be a better bet than gold

Compared with gold, the silver market is tiny. According to the Silver Institute, global silver mine production rose just 2% in 2015 to 886.7 million ounces—which would give it a value of less than US$20 billion at the current market price. And expectations for 2016 are for a fall in global output for the first time since 2011, a 2.4% decline to 784.8 million ounces according to a forecast from CPM Group.

On the demand side, investor purchases of silver coins and bars have surged from 50.7 million ounces in 2006 to 292.3 million ounces in 2015.

As well, India imported a record 228 million ounces of silver bullion in 2015 for use in jewelry, decorative items and the production of silverware.

It is conceivable that as the price of gold rises the price-sensitive Asian market could increasingly turn to silver to give as gifts and for personal storage of wealth.

Unlike gold, silver has the dual distinction of being both an investment as well as an industrial metal. One of the biggest drivers of industrial demand in recent years has come from the solar energy industry.

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