Silver remains a favorite for the small investor.
Bullion.Directory precious metals analysis 30 January, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Senior FX and Commodities Analyst at FX Analytics
Both gold and silver snapped back today, regaining most of the losses garnered yesterday following the FOMC minutes statement. US GDP slowed dramatically in the fourth-quarter with the initial preliminary reading of 2.6 percent. This was less than the three percent general consensus and nearly 50 percent less than the third-quarter. Gold gains 2.25 percent, while silver jumps 2.87 percent.
Silver remains the go-to precious metal for small and retail investors. Data shows that the US Mint has sold 5,288,500 American Silver Eagle one ounce coins in January (2015 mintage).
2015 American Gold Eagles did not see so much love with only 81,000 one ounce coins sold in January.
According to the US Mint, this was the lowest quantity sold for January since 2008. Sure, on the surface this seems bad (like on the surface economic data seems great!).
However, in January 2008, only 26,000 coins were sold – and this was prior to global central banks taking the world hostage.
Additionally, gold coins typically appeal to smaller investors, while the ultra wealthy prefer “deliverable” gold bars that are stored away for safety.
Gold’s performance this month could also directly effect coinage sales. Gold, including Thursday’s nasty dip lower, rose 7.93 percent this month opposed to a two percent decline in in the S&P 500. Coin sales can fluctuate as price sensitive buyers hold back, and minted gold coins often carry a hefty premium.
Then again, it is likely more simplistic than that for investors looking to hedge the inevitable economic calamity around the corner. The gold/silver ratio is a metric used to value one metal over the other. It is the spot gold price divided by the spot silver price, and it determines how much silver one can buy with an ounce of gold. The more silver bought with one ounce of gold, the more “undervalued” silver.
Currently, the ratio is 74.4, or 74.4 ounces of silver per ounce of gold. Investors see value in that. Notably, when silver approached $50 per toz, the ratio dipped to 40 signaling that silver was too “overvalued” and the sharp correction began in 2011.
Given the high ratio since silver corrected, there is no doubt why silver coins remain supreme.
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