Oxford Economics says allocating 4% to 6% of silver will be optimal over the next five years

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(Kitco News) – Improving market sentiment is driving silver The market reached a six-week high, with prices seeing a strong breakout above the psychologically critical $20 an ounce level.

Not only silver Supported by strong fundamentals, however, analysts note that the precious metal is seeing strong technical momentum after spending most of the summer in oversold territory. Gold is seeing some pressure on the short as prices breached the key buy stops at $20 and $20.25.

Silver prices for December were last traded at $20.48 an ounce, up 7.57% on the day. The precious metal is seeing its best percentage gain since mid-August 2020. silver Gold is outperforming significantly, which is testing resistance at $1,700 an ounce and up 1.38% on the day.

Silver’s rally comes just days after Oxford Economics promoted the precious metal’s role as a primary asset in its investment portfolio.

The economic research firm conducted the study on behalf of the Silver Institute; According to analysts, silver should be considered a premium asset class and investors will benefit from allocating between 4% and 6%.

“This is significantly higher than most institutional investment portfolios, where exposure to silver In general, it is not more than 0.2% and is achieved mainly indirectly through commodity indices,” the analysts said in the report.

Analysts pointed out that most investors look at gold and silver As similar cash metals, safe haven assets; However, Oxford Economics said there are some important differences between the two precious metals. The biggest difference between silver and gold is industrial demand. The report indicated that nearly half silver The demand comes from industrial applications.

Analysts noted that structural demand for silver remains positive, benefiting from long-term growth in various green energy applications, electric vehicles and energy storage, as well as 5G devices and networks.

“Silver encompasses the investment attributes of the precious metal while at the same time boasting a wide range of active industrial applications. While silver price movements are closely related to gold, our analysis indicates that its yield characteristics are sufficiently different to make it a valuable diversification tool that warrants the commitment of its own portfolio,” analysts said.

Similar to gold, analysts have also noted that silver has a relatively low correlation with developed markets, making it a valuable diversification tool.

“Silver has gone up during four out of eight stock market corrections over the past 20 years, while it has fallen less than stocks during the other four episodes. Although silver has underperformed gold as a safe asset, it can still help. reduce losses in times of market stress.

The gold/silver ratio has been in a steady uptrend for the past decade silver struggled to outperform gold in unstable economic conditions; However, Oxford Economics said it expects the trend to reverse in the next few years as normalcy returns to the financial markets.

“We believe that the price of gold will also come under pressure in the near term as safe haven flows subside and uncertainty subsides. Although moves in silver prices are likely to remain gold correlated, the silver Analysts said the price should be somewhat insulated from this market correction given that it was not inflated to the same extent as gold, and silver would also benefit from strengthening industrial demand.

The Oxford Economics baseline expects the global economy to avoid a severe downturn, with global GDP averaging around 2.7% over the next five years. Economists see inflation peaking in 2022 and a resumption of the inflation-lowering trend of the past decade.

Disclaimer: The opinions expressed in this article are those of the author and may not reflect the views of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. cannot. Nor does the author guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to conduct any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. does not accept The author of this article will be liable for losses and/or damages arising from the use of this publication.

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