We believe silver prices will act positively as the top three silver producing countries has reported a decline in mine production in the first half of 2019.
Last week, silver prices strongly outperformed gold gaining 5.5 percent while gold prices remain flat as the investors' eye shifted towards falling gold:silver ratio.
Base Metal complex continued its indecisive move on heating trade war between US and China. All the metals have traded on a subdued note with the exception being Nickel surging 14 percent as the Indonesian minister signed a new regulation on restricting nickel ore exports from December itself.
Energy complex traded higher last week with Nymex Crude rising 3 percent on huge drawdown in crude oil inventories and as Hurricane Dorian strengthened moving towards the weekend. Nymex natural gas price closed higher by 6 percent on expectation of higher cooling demand and as the hurricane season starts.
Gold:silver price ratio has fallen towards 83 after testing the record high of 93.5 in the month of July 2019. The ratio started to fall the most in July 2019 after the investors started to shift their funds towards ETFs on increasing fears of recession.
Gold prices have shown a stellar performance in 2019 on negative bond yields and probability over interest rate cuts in future. Gold prices gained almost 15 percent this year, normally both silver and gold prices always move in tandem and post-rally in gold now it is the time of silver to catch up.
Fundamentally, we believe silver prices will act positively as the top three silver producing countries has reported a decline in mine production in the first half of 2019 with Peru (-10 percent), Chile (-7.2 percent) and Mexico (-4 percent).
If the current pace in decline continues we could see global silver mine supply falling towards 840 million ounces in 2019 from 855 million ounces in 2018 benefitting silver prices.
We expect silver prices to outperform Gold prices in remaining months of 2019 and expect Gold:Silver price ratio to move down towards 70-72 in the near term. Currently, the ratio stands at 83.
(The author is Commodity Analyst at Narnolia Financial Advisors.)Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.