Silver expected to outperform gold as much higher silver prices await

By Staff Writer / September 18, 2020 / Article Link

With investors and analysts remaining bullish on gold, silver fits neatly into investments related to sustainability. Since the start of 2020, gold has rocketed to a new all-time high near $2,070 in early August, up 40%.

At the same time, silver bottomed in March near $12, then soared to a $29 peak, also in early August, for a blistering 140% gain in just 4½ months. Silver has heavily out-gained gold since the first week of July and is now up 52% on the year versus a 29% gain for gold. After hitting a historic silver-gold ratio of 124:1, the ratio has since come down to a more normal 75:1, approaching its long-term average of around 58:1.

As both an industrial metal and a monetary metal, silver’s monetary side is likely to have an outsized impact. With current industrial uses accounting for about 50% of silver’s demand, the value of the precious metal is expected to reach above $37 before the year is out, as its monetary role starts to dominate once again.

Silver stocks are reacting in much the same way as silver itself. This leaves some room for investors who want to capitalize on rising silver prices to increase their positions in Canadian mining companies and silver producers like Paramount Gold Nevada Corp (PZG), Pan American Silver Corp (NASDAQ:PAAS) and Agnico Eagle Mines Ltd (NYSE:AEM). The shares of these mid-tier and junior miners are performing very well and their good growth potential puts them among the best silver stocks to buy.

Pan American Silver Corp is one of the top performers among mining companies in Canada. Shares of the Canadian explorer, developer and producer of silver traded at around $35.12 each at close on Thursday. This pointed to a market capitalization of $7.43 billion.

So far this year, the junior miner has achieved an increase in its share price of 48.3%, placing in between the Global X Silver Miners (SIL) exchange-traded fund (up 47% this year) and the iShares Silver Trust (SLV), which is up 53% this year. The 14-day Relative Strength Indicator (RSI) of 52 tells that the stock is still far from overbought levels.

For full 2020, Pan American Silver aims to take advantage of rising metal prices with a mining output of 19 million to 22 million ounces of silver (paying an all-in sustain cost of $10.50 to $12.50 per ounce) and of 525,000 to 575,000 ounces of gold (enduring an AISC of $1,050 to $1,125).

Pan American’s holdings in silver mines in various regions strengthen its ability to adapt to the coronavirus restrictions.