Silver Under-Performing - Will It Last?
Since the start of 2014, the price of silver has lagged the other precious metals in many ways. Silver has really only kept pace with gold -- even as silver is thought of as a leveraged bet on gold prices. Silver has notably underperformed another white metal, palladium, which is currently nearing a 52 week high. The hangover in the silver market from the 2011 price explosion still seems to be persistent, even as silver is up over 10% from its last December lows. Because silver industrial demand is still off from its 2011 peak (though many sources claim it is at least increasing) and with evidence of stockpile increases at places like the COMEX, few are taking seriously the idea that silver will ever retake its former peak of around 50 dollars, let alone move decisively to even higher levels.
And once again today, with concerns out of China regarding deflation, silver fell the hardest of all four precious metals, in sympathy with copper - which saw one of its largest declines in a couple of years. The fact that silver was moving in sympathy with copper underscores the widespread belief that silver is merely an industrial metal. Obviously, gold is the most important of the monetary precious metals. But this fact is already expressed in the global value of all gold -- at over 6 trillion dollars -- which dwarfs the value of all known silver in the world - at merely 40 billion, or less than 1% of the value of the world's gold.
The wide discrepancy between interest in gold and interest in silver still fascinates me, because as recently as about 100 years ago, the value of the world's silver was actually greater than the value of the world's gold. Silver does have a long and strong monetary history. If any government were to decide to once again add to their official stockpile of the metal (most governments used to have silver stockpiles but now have almost none), or if some other large financial entity thought that silver would be a good investment, you can understand why many silverbugs are so bullish on the price, based on how many people have absolutely zero exposure to the "other" monetary metal.
It was just revealed this morning that the CEO of Northwestern Mutual understands the need for gold in insurance portfolios and explained why the company owns over 400 millions dollars of the yellow metal. Gold is a store of value. This stance appears to be unusual among large institutional investors and I'm sure the Northwestern Mutual gold portfolio comprises well under 1% of the company's assets. So there are many more large investors who could get involved with the precious metals. One wonders if other insurance funds, pension systems, governments, or multi-billionaires will ever feel the need to even make a 1% investment in silver. If they ever did, it won't take long for them to realize how little metal is actually around to own.