from Truth in Gold:
Silver hasn’t been so cheap relative to gold for more than seven years and with mine supplies forecast to contract this year that may be a sign it’s ready to come out of the yellow metal’s shadow.
Mine production of silver will probably drop in 2016 for the first time in over a decade and demand is set to outstrip supply for a fourth straight year, says Standard Chartered Plc. Much of the world’s silver is extracted from the ground with other minerals, and output cuts announced by the biggest miners will hurt supplies of the metal as well as others such as copper and zinc.
Silver’s 10 percent advance this year has trailed gold’s 18 percent surge as financial turmoil and worries about a global slowdown sent investors flocking to the yellow metal as a haven.
An ounce of gold bought about 83 ounces of silver last month, more than any time since the financial crisis of 2008. That’s a signal to some that it’s relatively undervalued and will narrow the gap.
More than 50 percent of demand comes from industry, including about a quarter from electronics, and to some extent silver’s fortunes follow those of industrial raw materials such copper, zinc and lead. The London Metal Exchange index of six metals has climbed about 14 percent since slumping to the lowest level in more than six years in January.
“The ratio can go higher still, but at some point it will turn, and when it turns it tends to turn with real vigor,” said Ned Naylor-Leyland, manager of Old Mutual’s Gold and Silver Fund in London, which has indirect exposure to bullion through selected mining stocks. “I’m not moving yet. When the trend change is clear, I’ll be ready to move money across from gold to silver.”
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