In a way, talking about silver seems so last month, though really it’s still a huge market obsession.
A recent BofA/ML report from Michael Widmer offers up some really fresh observations on the silver market.
First, a remarkable look at the shift in demand breakdown from industrial demand to investment demand. 2010 was way out of historical norms.
Next, the most useful look at the gold/silver ration we’ve seen yet. Basically, because silver has industrial applications — whereas gold, for the most part, does not — the gold/silver ratio tends to shrink during boom times, and expand when the economy is slackening. Thus if the global economy weakens, look for silver to weaken more than gold, as that industrial demand dries up.
Meanwhile — and this is especially important in light of the recent selloff — the insane demand for physical silver coins has clearly begun to ease.
And along these lines, it’s false that there’s any kind of physical coin shortage, as some have attested. The premium paid above spot silver has remained pretty steady.