Why is silver cheaper than gold

Perhaps the fate of silver is buried in just one paragraph, in no more than eight sentences. Perhaps because of them the noble metal only plays second fiddle, chipped behind the shining gold. Perhaps it is the biblical story of the disciple Judas Iscariot, who betrayed Jesus and gave his proverbial 30 silver coins a bad omen. And scratched the nimbus of silver as a noble metal.

In the past few weeks, however, there is not much left of silver as an eternal second, as gold's little brother, as an ignored precious metal. Because in the past few weeks silver has stepped out of this shadow, savers and speculators all of a sudden unanimously bet on "gold for the poor" of all things. Since the beginning of July, the silver price has shot up by up to ten percent in little more than two weeks. Many on the silver market are now wondering: Can this wild catch-up race continue?

The comeback of the precious metal began at the beginning of last month, on July 5th to be precise. Financial professionals had found a shocking figure in their tables: On that day, an ounce of silver suddenly cost 0.0107 times as much as an ounce of gold. Even the data provider GFMS, otherwise not known for linguistic exaggerations, called this "rocket-like" in the financial terminals of precious metal professionals. Because in relation to gold, silver has not been so cheap for 27 years.

What happened next shows that the financial market is sometimes no different from the summer sales. If something is considered particularly cheap, then many strike. The speculators bet on silver, private investors jumped on the bandwagon. "Silver then made up lost ground," says metal expert Carsten Menke from the Swiss private bank Julius Baer.

Because of course, the mood and the environment were brilliant. In the US, the central bank cut rates this week. The fact that silver brings no interest is becoming less and less important. This is also reflected in the price, a troy ounce currently costs $ 16.28. Silver fans hope for a change of guard on the precious metals market, that silver will overtake gold. However, that could remain a pious wish. Because even if many financial professionals keep equating the precious metals gold and silver, there are serious differences between the dissimilar siblings. In contrast to gold, 56 percent of silver demand comes from industry, according to figures from the data provider Refinitiv. Silver is used as a conductor on circuit boards in smartphones and screens, and in solar panels it is used as conductor paste. This means that the fate of the supposed safe haven is dangerously closely linked to the course of world trade. When things get turbulent in the world economy, it affects the white metal. Worse still: "That puts a lid on the silver price," writes the GFMS analysis company. The big breakout to the top?

In the end, it seems pretty unlikely. Because the trade war is particularly badly affecting the business with Chinese solar panels, which contain silver. And to make matters worse, the Beijing leadership has now also canceled subsidies for the domestic solar industry. These are not good prospects in the medium term - and experts are skeptical in the long term as well. Because when the price of the metal was more than 40 dollars a few years ago, it became really painful for many industrial groups to work with silver at all. They banned the white metal from their production chains and often replaced it with aluminum. "This industrial demand will never come back," says precious metal expert Menke. Bleak prospects for a pale metal.

In the event of a financial meltdown, silver would be in great demand

Anyone who still believes in a massive rise in silver prices has to believe in a kind of financial meltdown, in a collapse of the global financial structure. Then silver could rise to a kind of substitute currency, suddenly even be more popular than gold. "Because you can even use silver to pay at the bakery," says investment advisor Rainer Beckmann from asset management company Ficon Börsebius Invest. This would hardly be possible with a conventional gold coin, as it costs far too much to only be able to do a mini-purchase at the bakery. "A couple of pieces of silver can't do any harm if the worst comes to the worst," says Beckmann.

Investors should be aware, however, that they are paying comparatively dearly. Because whoever buys silver has to spend around twelve percent more than the world market price for an ounce of the precious metal at a precious metal dealer in euros. A steep retailer premium, as a test by SZ showed. And then there is the VAT. The fact that silver actually emerges from the shadow of gold is likely to remain a pipe dream.