Prices of silver and gold traditionally move in one direction, as silver tends to outperform gold.
While gold prices rose by 8% in June to a 7-year high, reaching 1,400 USD per ounce, the silver managed to advance only by 5%, remaining well below its last peaks.
Currently, silver is traded at 15.25 USD per ounce, making it the worst performing precious metal this year. In addition, silver costs 93 times less than gold, and this is its lowest relative value since 1992.
Concerns about trade conflicts and the slowing global economy have prompted investors to turn to precious metals, which have traditionally been perceived as safe assets in hard times.
Unlike gold, more than half of silver consumption comes from the industry, and weakening economic growth undermines the prospects for demand and retention. According to the analysts, the gold/silver ratio may reach 100 times.
The gap between gold and silver has increased almost uninterrupted since 2011. This, according to Citi Bank analysts, coincided with the period of transformation of banks by net sellers of net buyers of gold. Citi also thinks that the price difference between gold and silver will grow, as banks are currently making the largest purchases of gold in recent decades.
Purchases of silver bullion and investment coins drop to 166 million ounces in 2018 compared to 300 million ounces in 2013, according to the consulting firm Metals Focus. The silver demand for investment in the US also shrank to 44 million ounces in 2018, compared with 122 million ounces in 2013. Metals Focus cited Donald Trump as president of the United States as a reason why many investors believe, that the country is in safe hands.
The consulting company expects for the fourth consecutive year a surplus of the silver market in 2019 to be 33 million ounces and the average price will reach 15.60 USD per ounce, which is 1% less than 2018.
According to Ole Hansen of Saxo Bank, silver could end the year at 16.50 USD per ounce.