Silver: The Precious Metal

Josh Patt from SeekingAlpha explains that Thursday’s action purely puts silver’s unknown asset class into precious as oppose to industrial. While all the base metals fell Silver rallied 15%.

He also elegantly explains gold’s recent price action.

Over the past month, gold has been falling along with other commodities and equities as market players were deleveraging to raise cash and cover open positions. This hit everything, including gold, raising some doubts about gold’s status as a safe haven in times of market turmoil.

This all changed suddenly Thursday, with gold’s sudden jump while the markets continued their decline. Before then the desire was to raise cash, and gold isn’t cash, so it was sold. Overnight, the fear of a systemic failure became greater than the need to raise cash, and gold is insurance against disaster, so it was bought. Apparently so is silver.

The vast majority of silver mined today is used in industry. On your average day, silver’s price is driven by industrial demand, but the monetary element is there too. On days like Thursday it’s silver’s monetary element that drives demand. Because, when things get really bad, silver provides disaster insurance just like gold. Maybe even better. (Emphasis ours).

Interesting insight.
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