Recent price movements in silver have been less volatile than gold as the charts below illustrate. That is rather unusual. Silver is usually the volatile sister and gold is the paragon of stability.
What is going on? And does this tell us anything about the likely future direction of precious metal prices?
Well this seems to confirm what market participants like Eric Sprott have been saying about silver. Namely that investors are investing equal amounts of money in both gold and silver these days, and that means fifty times more silver is being sold in terms of ounces.
Silver prices are therefore better supported than gold by investment flows, particularly as total silver reserves are reckoned to be less than half the amount held in gold. It is a supply and demand issue.
That said the inflow of investment money into precious metals after the $132 billion Greek sovereign debt default has not happened just yet. For the moment investors are entranced by US stocks in what seems to them a slightly less dangerous global economic environment post-Greece.
ArabianMoney adheres to the long-term view of money creation by global central banks to offset humungously large debts. Greece was ’solved’ by the ECB stuffing $1.3 trillion in soft loans into European banks. All the central banks are printing money like mad, with only Brazil now the sole standout exception.
OK so we have not seen QE3 from the Fed, but it is hardly needed with the ECB doing its stuff. QE3 is still there for another down day on Wall Street.
Precious metal prices will have their day and then some in this environment. It is just a matter of time and a little patience. Getting the exact timing of the upswing will be difficult so the important thing is to be invested for when the market does pop.
The ArabianMoney investment newsletter has been providing its subscribers with some first-class investment ideas on how to capitalize on rising gold and silver prices (subscribe here). It has silver down as its top investment tip of the year. Holding up better than gold to the current down pressure is a good sign for silver.