Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Silver prices hit a two-year high Monday, climbing above $21 an ounce, as the precious metal continues to gain from the safe-haven rally following the UK referendum, driven mostly by a sudden jump in Chinese demand.
Asian buyers scooped up vast volumes of physical silver overnight, with the Shanghai Futures Exchange, the most actively traded silver futures contract, hitting its 6% daily maximum at opening to reach 4,419 yuan ($663) a kilogram.
Since the UK’s referendum, silver prices have climbed 17% on the New York Mercantile Exchange, while gold has risen just 7%.
Precious metals have risen on anticipation of further monetary stimulus measures from central banks in the wake of the UK’s vote to leave the European Union.
But while gold has got most of the media attention, silver has captured investors’ interest. Since the vote on June 23, bullion prices have risen 7% on the New York Mercantile Exchange, while silver has climbed 17%.
On Monday silver rose as much as 6.9% to an intraday peak of $21.132 an ounce, its highest value since July 2014, before paring some gains to trade at around $20.35.
The December contract for silver futures has rebounded 23% over the past month following a correction in May. It has gained 31% year-to-date.
(Chart from Kitco.com)
Despite the recent rally, silver remains about 60% off its 2011 peak above $49 per ounce. This, paired with the metal’s low price relative to gold at present, suggests the grey metal is likely to go up a lot further.
“If you use the silver-gold ratio to look at historical prices versus where we are currently at, for each ounce of gold that is mined, roughly a little less than 10 ounces of silver is mined,” PureFunds CEO Andrew Chanin told CNBC last week. “But the ratio is trading at over 70:1 and it seems like there may be an opportunity. Historically, that average has been closer to 40, or even lower if you look at a long time period,” Chanin noted.
Traders are betting that both the Bank of England and the US Federal Reserve may hold or even cut interest rates this year, lending a boost to gold and silver, which typically benefit when interest rates are low.
Comments
ELISSA JUNG
I LIKE SILVER, THE POOR MAN;S GOLD. AS JUST AN INVESTMENT GOLD IS GOOD BUT AS A MEASURE OF COLATERAL SILVER IS BETTER. AFTER ALL, A CHIP OFF THE OLD BLOCK of gold WILL NOT BUY ME A POUND OF HAMBURGER LIKE A FEW SHINY SILVER COINS. I’M JUST A PEASANT ! WHAT DO I KNOW.