Silver overtakes gold as best precious metal on China confidence

(April 15, 2016 - by  Eddie van der Walt and Ranjeetha Pakiam, Bloomberg)

Metal’s weekly jump extends gain this year to 17%.

Silver has leapfrogged gold as this year’s best-performing precious metal on signs of a stabilizing economy in China, one of the biggest users.

Silver’s rally this week took its 2016 advance to 17%, beating gold’s 16% increase. Silver, used in industrial products ranging from electronics to solar panels, has outperformed gold for six days and is trading near a five-month high. Holdings in silver-backed funds have risen almost every day since the start of March.

Precious metals got a boost at the start of the year amid concerns about the global economy and as traders reduced expectations for the pace of US interest-rate increases. This week, a flood of Chinese data including trade and industrial output, helped paint a brighter outlook for the nation’s economy. Industrial items account for half of silver demand, compared with about 10% for gold.

“The data out of China will definitely have lent support to silver in its more industrial applications,” Mark O’Byrne, a director in Dublin at brokerage GoldCore said by phone. “Silver can be quite volatile and the sharpness of moves can catch people by surprise.”

Silver for immediate delivery added 0.3% to $16.21 an ounce by 11:49am in London, according to Bloomberg generic pricing. It’s up 5.5% this week, the most since early March. Gold increased 0.2% to $1 230.29 an ounce and has gained 16% this year.

Holdings of silver in exchange-traded products totaled 19 915.6 metric tons as of Thursday, the highest since December 2014, data compiled by Bloomberg show. Gold assets are set for a third weekly decline.

It costs 75.8 ounces of silver to buy an ounce of gold, the least since December. The ratio had reached a seven-year high in February as gold rallied.