Another Stock Market Selloff Could Drive More Bullion Buying

Many who would have considered silver a “no-brainer” versus gold at current prices are now second-guessing. They wonder if something has changed.

Is silver going to trade primarily as an industrial metal? Is gold the only real safe haven asset or effective hedge against dollar devaluation?

While it is possible that investment trends and psychology have shifted permanently, we highly doubt it. Silver is underperforming in the paper markets only and those markets are disconnected from reality.

The investment demand for physical silver has never been higher. This is true both in the retail bullion markets and in the futures markets where there has been a huge spike in the number of contract holders standing for delivery.

Meanwhile, the inventory of actual bars in COMEX vaults relative to the number of paper ounces being traded just keeps dwindling.

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There is plenty of demand for silver as a safe-haven – you just can’t tell by looking at the paper price. Consider that while the ratio of paper gold to paper silver is 113:1, the ratio is far lower when it comes to actual coins such as the American Eagle. The price of one gold American Eagle is equivalent to that of only 77 silver American Eagles.

Seasoned precious metals investors continue to favor silver here, even if they have been penalized for making that choice in recent years.

Despite the poor showing of silver in the broken paper markets, silver’s fundamentals will surely improve as the economy gradually reopens, and industrial demand recovers.

And if the recent bull run in gold is the start of something much bigger, silver is very likely to outperform before that run is over.

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Kirk Sheffield 1 year ago Member's comment

Depends if folks get the Margin calls and are forced to sell the $SLV and $GLD to pay for their lack of risk management.

Wall St. Wolf 1 year ago Member's comment

I would hope the margin call selloffs were flushed out in the first wave down a month ago, hopefully in a second wave down people wouldn’t be levered as much.

Dainan Gilmore 1 year ago Member's comment

Seems like people never learn so yeah, silver going to go down too.

Dan Jackson 1 year ago Member's comment

Lol maybe, but the Fed is essentially saying “here take some margin, have more than you need!!” Right now.

Wall Street Wiz 1 year ago Member's comment

True, I definitely think that there’s gonna be another downturn and hopefully #gold and #silver will shoot up with all the QE caused inflation