Gold-to-Silver Ratio suggests huge upside for Silver in 2015

Author: Paul Ploumis
06 Jan 2015 Last updated at 07:24:23 GMT
NEW DELHI (Scrap Monster): The Silver prices plunged nearly 22% in 2014. The metal is poised to make strong recovery in 2015, according to analysts. The Silver prices in 2015 will be mainly driven by unprecedented rise in demand from industrial sector. Another key driver for Silver prices is the anticipated drop in gold-to-silver ratio from their 2014 peaks, which should take the prices higher during the year.

According to studies conducted by the World Silver Institute, demand will outstrip supply in 2015. The use of Silver in industrial applications is likely to report robust growth during the year. The use of photovoltaic cells is all set to explode, as many countries including China, Japan and Germany have committed to boost production of solar power. It must be noted that Silver is a key component of photovoltaic cells. Silver’s industrial demand is likely to jump by 350 million ounces by 2018.

With more miners suspending production activities, the mine silver supply is expected to remain constrained. As supplies fail to match demand, prices may trend higher.

As per current gold-to-silver ratio, 75 ounces of silver are required to purchase one ounce of gold. This is quite high, when compared with historical average of 47 ounces. The current ratio suggests that silver is highly undervalued in comparison with gold. According to analysts, the ratio is likely to drop to 60 ounces during the course of 2015. In other words, silver prices should touch $20 per ounce, which implies 26% upside for the white metal from its current levels.