By Yoon Ja-young
Following Britain's decision to leave the European Union (EU), investors are turning to "safety" assets. What is notable is that the price of silver is rising steeper than gold.
Silver traded at $40.40 an ounce on the New York Mercantile Exchange on July 6, surpassing $20 for the first time since August 2014.
Cho Byung-hyun, a market analyst at Yuanta Securities, noted that the market's interest in precious metals such as gold and silver has been strong since early this year _ gold has risen 27 percent this year while silver has risen 45 percent.
"It is true that gold got the spotlight earlier but the price change in silver is more overwhelming than that of gold," the analyst said.
He said silver's steep rise reflects the market's expectation on economic recovery. While silver is less valuable than gold as a precious metal, it is more useful than gold as an industrial material. Silver is used in goods such as smartphones, flat-panel TVs and solar-energy panels. Around half the silver consumed last year is estimated to have been used for industrial purposes.
"If it was simply due to increasing demand for safety assets triggered by Brexit, gold should have been stronger than silver," Cho said. "However, silver is rising steeper and it means expectations on economic recovery are gaining as much momentum. Expectation on economic stimuli through fiscal spending is the driving force."
Jewelry retailers say silver is more accessible for investors than gold. According to the Korea Gold Exchange, a jewelry shop in Jongro, downtown Seoul, a 100-gram silver bar is 128,000 won while the same amount of gold is 5.6 million won. The shop noted that its silver sales had more than doubled from early this year, and banks are also seeing more investors looking for silver.
But analysts say silver's price is volatile.
Kim Hun-gil, an analyst at Hana Financial Investment, said gold is still better than silver over the long term. "Gold rose nearly 30 percent during the past six months, surpassing $1,300 per ounce," he said. "It has risen considerably, but we think it still has room for a further rise." He expects it to continue rising until the end of the year ― to nearly $1,500 an ounce ― amid increasing volatility in stock indices.
"Silver has surpassed the performance of gold, but investors should note that silver used to not only rise faster than gold but also cooled down quicker," Kim said. Silver is still far below $49, the top price it touched in 2011.
"Silver is twice as more volatile than gold and is thus vulnerable in terms of investment stability," Kim said. "Silver can be just another form of risk in the current market, where avoiding risks should be the top priority."
Following Britain's decision to leave the European Union (EU), investors are turning to "safety" assets. What is notable is that the price of silver is rising steeper than gold.
Silver traded at $40.40 an ounce on the New York Mercantile Exchange on July 6, surpassing $20 for the first time since August 2014.
Cho Byung-hyun, a market analyst at Yuanta Securities, noted that the market's interest in precious metals such as gold and silver has been strong since early this year _ gold has risen 27 percent this year while silver has risen 45 percent.
"It is true that gold got the spotlight earlier but the price change in silver is more overwhelming than that of gold," the analyst said.
He said silver's steep rise reflects the market's expectation on economic recovery. While silver is less valuable than gold as a precious metal, it is more useful than gold as an industrial material. Silver is used in goods such as smartphones, flat-panel TVs and solar-energy panels. Around half the silver consumed last year is estimated to have been used for industrial purposes.
"If it was simply due to increasing demand for safety assets triggered by Brexit, gold should have been stronger than silver," Cho said. "However, silver is rising steeper and it means expectations on economic recovery are gaining as much momentum. Expectation on economic stimuli through fiscal spending is the driving force."
Jewelry retailers say silver is more accessible for investors than gold. According to the Korea Gold Exchange, a jewelry shop in Jongro, downtown Seoul, a 100-gram silver bar is 128,000 won while the same amount of gold is 5.6 million won. The shop noted that its silver sales had more than doubled from early this year, and banks are also seeing more investors looking for silver.
But analysts say silver's price is volatile.
Kim Hun-gil, an analyst at Hana Financial Investment, said gold is still better than silver over the long term. "Gold rose nearly 30 percent during the past six months, surpassing $1,300 per ounce," he said. "It has risen considerably, but we think it still has room for a further rise." He expects it to continue rising until the end of the year ― to nearly $1,500 an ounce ― amid increasing volatility in stock indices.
"Silver has surpassed the performance of gold, but investors should note that silver used to not only rise faster than gold but also cooled down quicker," Kim said. Silver is still far below $49, the top price it touched in 2011.
"Silver is twice as more volatile than gold and is thus vulnerable in terms of investment stability," Kim said. "Silver can be just another form of risk in the current market, where avoiding risks should be the top priority."
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