Gold, Silver Move Opposite One Another to Start Week

The gold spot price fell and the silver spot price rose as Monday morning’s trading session got underway to start the week. Movement of those two metals’ values is not especially common but it is also not unheard of, especially since derivatives instruments have become more common.

As of 11am CST the gold spot price had fallen $1.20 and was looking steady at $1385.40 while silver had risen $0.25 per ounce to $21.95, slightly below a key technical support level of $22 per ounce. Gold has outperformed silver in recent weeks but many precious metals market analysts have called for silver to skyrocket in the coming months due to increased industrial demand, investors’ desire to diversify away from gold and the key factor of derivatives markets.

Derivatives markets include any type of precious metal investment vehicle that does not involve the investor taking physical delivery of the metals in question. Examples of derivates investments include pooled accounts, ETFs like GLD and SLV, and large-volume investment contracts in the futures and options markets also qualify as derivates.

Some analysts have said that the gold:silver ratio, which is the number of ounces of silver that it would take to purchase one ounce of gold, could shrink drastically over  the next couple of years due to growing interest in silver derivates and a waning interest in gold derivatives. It can be cumbersome and expensive to take delivery of and store silver, especially in large quantities.

Derivatives investments are attractive to silver investors because they (usually) tend to (almost) keep up with the silver spot price yet costs for shipping and storage are eliminated. However, the rising number of investors who prefer long-term safety will likely still invest in physical silver instead of “paper” silver, as the privately-held version of silver could be used in a national financial emergency. Visit the Daily Market Update page this Wednesday for the latest news on the gold and silver markets.

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