Silver has underperformed gold this year, providing an opportunity for investors betting on growth in demand for the white metal, as analysts warn of...
Silver has underperformed gold this year, providing an opportunity for investors betting on growth in demand for the white metal, as analysts warn of potential challenges to mining supplies.
On Tuesday, the most-active December silver contract SIZ23, -1.14% SI00, -1.14% settled at $23.40 an ounce on Comex, after posting a loss of nearly 5.7% last week, the largest weekly percentage decline since the week ended June 23, according to Dow Jones Market Data. Year to date, silver futures have lost nearly 2.7%.
The “hotter-than-expected “inflation data supports the argument around the Federal Reserve “still having some headroom to hike [interest rates] one more time in 2023,” said Lukman Otunuga, manager, market analysis at FXTM. Historically, the gold-silver ratio sits between 50 and 60, but currently stands at more than 80, he said. That means it would take more than 80 ounces of silver to buy one ounce of gold. The high number points to “silver being undervalued to gold on a relative basis,” said Gordon.
“Mining is a tough business, but evidence suggests it is only getting more challenging worldwide, especially in areas where silver is most abundant,” he said. Increased pressure and regulation around environmental, social, and governance mandates “disincentivize investment and could significantly impact supply in the future.”
He said Kopernik is “excited” about its investments in mining companies because most are trading below liquidation value, which he describes as valuation assuming current metal prices.
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