Is Silver Merely A Levered Gold Play?
A few interesting observations out of ETF Securities, which concludes that not only is silver a cheaper play on precious metal trends, but is the equivalent of a levered gold play. Yet based on the 50 year average gold/silver ratio of 50, silver still has about 20% upside to catch up to its technical value.
From ETF Securities
The silver price historically has often acted as a geared play on gold prices. Historically, silver returns tend to be more volatile than gold. Volatility is closer to an industrial metal than gold. When the gold price is rising, often the silver price outperforms. However, when the gold price falls, silver can fall sharply. As shown below, the ETFS Physical Silver (PHAG) has seen returns close to the ETFS Leveraged Gold (LBUL) recently, and has outperformed ETFS Physical Gold (PHAU).
The silver to gold price ratio – a barometer closely watched by investors – remains below historic average price levels. Gold and silver have tended to follow each other over time. Despite substantial outperformance of silver relative to gold in 2009, the silver price continues to trade at a discount compared to gold in relation to its long run (50 year) average.
Silver prices remain below historic highs. In contrast to gold, silver prices remain below historic highs (see below). Note that, like gold, silver prices have performed strongly in all major currencies.