Silver is often referred to as ‘poor man’s gold’ because silver is much more affordable – for example 1 ounce of gold is equal to 51 ounces of silver. Recently however silver has started to decouple from gold and is now moving with the price of copper.
The chart below shows a six month chart of silver with the price of copper (purple line) overlaid on top. The similarity in the price action is uncanny.
A 6 month chart of silver with the price of copper overlaid on top
Chart courtesy of Stockcharts.com
The price of copper has declined from a high of 4.65 US dollars per pound back in February of this year, to a price of 3.57 $/LB today.
The price of copper – thanks to its wide variety of industrial uses – has declined due to a worsening global economic outlook and it seems that for now at least, silver is being tarred with the same brush.
In the next few months I expect silver to rally along with gold once more as traders and investors remember that as well as being an industrial metal, silver also has an important monetary role.