Should Silver be Tracking Gold?

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Sentiment suggests that silver will, in fact, continue to track gold fairly closely, but I wouldn't bank on it exceeding the gold track and jumping ahead on its own.

It has been very evident in recent months that the silver price has been tracking the gold price very directly. Should this be the case?

There is a strong percentage of silver bulls out there who would say no - silver should be outperforming gold - after all it is trading below its long term price ratio with the yellow metal, but personally I am not convinced they are correct. Much has changed over the years. There is no longer any serious monetary element to silver and demand in the principal industrial market of photography is in long term decline as digital imaging takes over...

What worries me with regard to the silver market is the seemingly huge number of new producers who seem to be able to bring new silver production on stream extremely quickly...Silver output, therefore, is likely to show an increase over the next few years, while gold production is predicted to remain static or, more likely, continue to decline as it has for the past few years.

Logic therefore suggests that perhaps silver should not be tracking gold, but actually underperforming it. But then precious metals pricing seldom seems to follow logical patterns based on supply/demand fundamentals. Sentiment suggests that silver will, in fact, continue to track gold fairly closely, but I wouldn't bank on it exceeding the gold track and jumping ahead on its own.

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