Much has been made of the gold price surge in recent weeks, values of the yellow metal booming to levels not seen since 2013 around of $1,440 per ounce. What’s not been as widely reported, though, is the recent ascent of silver prices because of the tense geopolitical and macroeconomic situation.
The dual-role metal is trading just below recent three-month peaks around $15.40 per ounce right now, helped by holdings in silver-backed ETFs springing to their highest since late 2018, and it’s quite possible that it’ll keep charging given its poor price performance versus that of its bigger brother.
Silver tipped to keep surging
Indeed, the gold:silver ratio — a formula that essentially calculates how much silver it will take to buy an ounce of gold — still sits just off the 26-year highs punched earlier in June. This could suggest that while demand for rush-to-safety assets is baked into the gold price, silver is left with some catching up to do.
The boffins at Morgan Stanley certainly see plenty of scope for the silver price in the immediate term and beyond. They are tipping that a move through $16 per ounce in quarter three and then $17 in the fourth quarter will create an average annual price of $16.30 for 2019.
And beyond this the bank says that an unwinding of silver’s underperformance against gold, allied with improving industrial demand for the metal, should drive prices much higher. Average values of $17.20 and $18 per ounce are predicted for 2020 and 2021 respectively, and Morgan Stanley is pencilling in a long-term average of $22.20.
2 scintillating stocks
And this bodes extremely well for silver digger Hochschild Mining, a FTSE 250 share whose price has ballooned by 25% in the past four weeks alone. Given that concerns over a global economic slowdown and the US-Iran spat are unlikely to be soothed any time soon, we could well see some more hefty gains over the summer.
Hochschild might have surged in recent weeks but on paper it still offers plenty of value. Thanks to the solid outlook for silver prices, City analysts expect earnings at the business to balloon 94% in 2019. And this leaves the company dealing on a bargain-basement, sub-1 forward PEG ratio of 0.2.
If you’re more sceptical over silver’s ability to catch up with gold in the months and years ahead, though, then you might want to take a look at FTSE 250 share Centamin instead on the back of the bold price prospects for bullion.
This dedicated gold miner’s share price has swelled by around a quarter since the start of June as well and, like Hochschild, it also packs the sort of value that could keep investors piling in (an anticipated 20% profits uplift in 2019 leaves it with a prospective PEG multiple of 1.1 times. With risk appetite shaking across financial markets, now would appear to be a great time to get exposure to precious metals. And I believe both of these stocks are great ways to do just that.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.