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Silver offers an attractive opportunity at current levels
Precious metals are considered safe haven in the volatile markets and some investors are optimistic about such metal trends expecting the white metal to gain significantly once it gains momentum. The global economy is progressing after the 2018 setback, where the US economy expanded 3.2 per cent in Q1, and the year 2019 had one of the best starts since 2015 where, especially, gold remained volatile and stronger. The precious metal was marginally low as compared to 5-year average where the yellow metal lost 3.7 percent in 12 months and silver dropped 10.2 percent. The gains in the last part of 2018 extended to Q1 2019, where gold gained over 10 percent and silver gained 3 percent.
Silver continues to remain low
Even though the white metal is precious and rare; it underperformed due to poor weak supply and demand fundaments, where it is considered a popular hedge against fluctuations. Its strongest point is there is a huge value for the metal outside the investment zone. About 55 to 60 per cent of the metal goes into industrial processes, and 25 per cent is spent on jewellery, utensils and silverware. Only 15 to 20 per cent is invested in coins and bars.
The demand for the industrial processes and jewellery application remained low, and during the secure market uptrend, investors do not seek silver. The metal hit its peak $50 an ounce in 2011, and it took nearly 5 years for the metal to get to $13. The current value is $14.89 an ounce, which is almost one of the multiyear lows, where the geopolitical factors are not supporting the price.
Existing price attractive for the investors
At the current levels, silver may not look appreciable but there are investors who find the current prices attractive. The metal is almost 4 percent down from the end of 2018, while, in the past, it lost up to 9 percent. Some investors expect it to perform better than the yellow metal. There exists a lack of retail investment in the white metal; while; it’s physical demand grew 4 percent in 2019 to 3 year high of 1.03 billion ounces (the Silver Institute’s World Silver Survey).
The survey report by the Refinitiv finds the metal faces a minor deficit of 29.2 million ounces in the last year, and the IMF expects the global economic expansion to be at 3.3 per cent in 2019, where silver does not constitute the end product. It does not form the larger part of electronics, cars or medicines, hence, an economic slowdown will not affect the metal per unit and the solar equipment that use it, are mostly protected from economic growth, and the solar PV investments are driven by the government policies and subsidies. The key driver for such investment is ROI where the World Silver Survey finds the investment in bars and coins constituted 20 percent of the total in 2018, while, the demand for bars increased 53 percent, and the production fell by 2 percent in the last year.
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