Silver And Gold – Do They Move Together

Silver and gold are the most popularly traded among the precious metals. Though the factors that drive the prices of silver and gold are pretty much common, analysts have in the past observed that silver has not been able to keep pace with the rise in gold prices. Manipulation in the market and the increase in demand for cryptocurrencies are being thought to be the major concern why silver has lagged behind gold. But the real reason behind it is that silver is finding very less demanding industries which are the main reason why it is weak.

The demand for silver indefinitely weak and this is being magnified because of the slowdown in the economic growth. There are many theories revolving around why silver cannot catch up with the price of gold.

Why is silver lagging

Market manipulation is involved because there is a lot of paper silver that is being traded and which is impacting the price of this precious metal. This, in turn, is causing a problem in balancing the demand and supply of this commodity which in turn is being reflected in the price of silver. Also, the rise in demand for cryptocurrencies like BitcoinandEthereum is pulling the investors’ money to these virtual currencies. Thus the number of investors investing in silver is less.

These are considered to be some of the reasons why silver is not performing as well as gold.

The relationship between gold and silver

The relationship between gold and silver is not like they are perfectly correlated with each other. This is because the qualities and use of both the metals are different. The closeness in the correlation between gold and silver has lessened in the last few years.

Gold is still the most marketable asset and is used for huge transactions. Silver is a currency that is considered to be used as a last resort only. Also gold is a staple form of investment for the government and the banks. Central banks buy gold in order to reduce their risk in order to stabilize their financial system. This means that when there is a financial crisis there is a demand for gold which is very steady.

On the contrary, silver has no major role to play and this is why the price of silver is more volatile than the price of gold. This leads to greater fluctuations in the price of a silver in case of an alternate form of asset people are drawn to them and stay away from silver.

 

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