Gold & Silver 2015

Super silver

Silver as ever is the more volatile sister of gold. It’s in a tighter market. Silver is the rarer precious metal, so it does not take much buying to shift the price. Then again silver exchange traded fund holdings are up 10 per cent this year, there has been no exodus like the gold ETFs. Physical demand for silver is higher than ever.

November silver Eagle sales from the US Mint totaled 3,426,000 ounces, 49 per cent more than the previous year and that sets 2014 up for another record year for silver coin sales. Indian silver imports for 2014 will also be at record levels.

What could sustain a precious metals rally this time and force a break out to the upside from the sideways trading range? Simply a flight to safety as other asset markets breakdown. Whether you look at bonds or equities they have a definite sense of virtigo at these levels.

Yesterday investors dumped stocks as the Chinese authorities took steps to tighten lending. Meanwhile fears about Greece finally leaving the euro and defaulting on its debts resurfaced after Athens announced it would hold its presidential election two months ahead of schedule. Greek stocks plunged an eyewatering 13 per cent.

Prices going up

Gold and silver are cheap by comparison to stocks and bonds. The fear of higher interest rates to come is over done. The global economy can’t take it. More money printing is on the way to sustain low interest rates. They are already negative in the eurozone making gold a positive hold there by default.

There is also a disconnect between the paper futures market for the precious metals and the underlying physical shortage that can only be made good one day in the future by radically higher prices. Recent figures showing further withdrawals of physical metal from the futures exchanges suggest that day of reckoning is coming.

The best asset class to buy for the year ahead may be the one most neglected in the previous year. That said precious metals could still have one last dive into the abyss in a global financial crisis and give the naysaying chartists their moment of glory. This would not last for long as we saw in the 2008-9 crash before gold headed back up to $1,923 an ounce in 2011.