New York / Frankfurt (Godmode-Trader.de) – Stay true to gold when interest rates change? Gold experts in particular are not very confident at the moment. “I am skeptical,” said Frank Schallenberger, a LBBW gold analyst at the Frankfurter Allgemeine Zeitung. The only good news about the price of gold lately has been from gold securities. Since the beginning of the year, ETC has received 240 tons of gold. Looks different mixed. Jewelry production, global demand for ingots and coins, and central bank gold purchases: demand is weaker in many areas than a year ago, and gold supply has increased. And that’s with a very strong dollar and rising interest rates. Schallenberger sums it up: in this context, he recommends “lowering your hands from the gold”.
What applies to the yellow precious metal also applies to his little brother, silver. This is the main thesis. But the reality is different here. Unlike gold, which is primarily considered a precious metal, silver is primarily an industrial metal. Demand for shiny gray metal from industry is increasing, especially during the energy transition. Silver is used in industry, which has accounted for more than half of annual global demand over the past five years.
Against this background, the evolution of the price of silver is sober. According to the Silver Institute, the market is in deficit, which means that demand is higher than supply. That should really increase the price. However, while other industrial metals have risen sharply in the meantime, silver notes have moved relatively little.
The latest trend is more like gold. In March, the banknote briefly cost 26.40 an ounce after Russia attacked Ukraine. The price has fallen again in anticipation of a rise in interest rates in the US and now in Europe. To sum up, there wasn’t much to win this year. The annual result is negative.
Silver is in great demand in the industry and is therefore out of reach of the capital market. Is the price of silver controlled and even depressing in the background? The basics would actually justify a higher price. According to the analysis of raw materials analyst Michael Lynch from General Dynamics Information Technology, this may be the case. According to him, the price is set not on the physical, but on the market with futures and the like. And that’s where the big U.S. banks call the shots.
Lynch analyzed the actions of the New York Mercantile Exchange Comex and noted the anomaly in 2021. in December, when over-the-counter silver securities appeared to have been settled. Bank of America is a new entrant in the silver contract market and has not noticed the specification. The metal market has jumped a large caliber, with JPMorgan collecting over 100 million tonnes of silver in recent years, keeping the market liquid. In any event, it is alleged that JPMorgan lost a significant amount of material as a result of the action.
So far, the bank has been able to set the course using its large physical reserves. Especially with short guesses, as part of the position needs to be physically protected. “The bank was able to maintain or lower the price below certain base prices within the set deadlines,” explains Rolf Ehlhardt, a financial expert at ICM Independent Capital Management Vermögensberatung.
It seems that due to the actions of the Bank of America and the changed behavior of investors (market participants are investing less in silver paper and silver is being delivered physically), there now appears to be a lack of liquidity in the market. There seems to be much less physical metal in these markets now. According to Michael Lynch, JPMorgan has lost 60 percent of its silver stake overall. If the demand for physical material continues to increase, it may cause a brief compression. “Anyone who doesn’t invest in silver should only look at prices,” says asset manager Ehlhardt. Target prices of $ 30 to $ 50 are then no longer utopian.
Compared to gold, little brother metal looks cheap. The ratio of gold to silver is currently 84. In 2011, when the price of silver was $ 50 an ounce (gold was $ 1,920), that ratio was 34. If that ratio ever occurred, the price of silver would be about $ 58. but only if the price of gold does not change.