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Gold versus silver? It is market parity


There is some parity between the yellow and white metals, i.e. equality on the global market of precious metals. However, many experts believe that gold is still dominate despite a short-term decline

The experts of the precious metal market declare equality of both trading tools and their equal importance for investors. The difficulty is the correlation of gold and silver with such economic and political factors, as interest rates, economic activity in this or that country (first of all, wholesale and retail sales), as well as social and political phenomena. Gold is also affected by fundamentals such as the current value of the dollar, regulatory meetings and investor demand.

Experts use the same fundamental principle to evaluate yellow and white metals:

1) Gold equals real (fiat) money.

2) Silver is an industrial metal, its demand is closely correlated with industry.

These principles are fundamental, but there are also secondary ones. For example, the yellow metal, like the white metal, is also used in industry. Besides, silver is also available as a payment instrument.

It is difficult to overestimate the significance of gold, although the demand for silver is also constantly growing. Experts consider the yellow metal to be equal in value to the US currency and sometimes superior to it. Notably, gold was a means of payment before the appearance of the greenback. The value of the yellow metal is constant and unchanging. Gold is considered a standard of value (measure) for other currencies and metals. Analysts believe that only the USD is a determining factor in gold price.

The situation with the white metal is different: it is considered an industrial commodity. Silver's dollar-denominated value reflects its use in industry. The white metal is rarely available as a money instrument. If economic activity slows down, industrial demand declines, and silver sharply declines. Notably, during 50 years silver has fallen during every recession. The base value of the yellow and white metals is based on their initial fundamental evaluation. This means that gold is valued as real money and silver's benefit is due to its efficiency for industry.

At the moment, the precious metal market is relatively stable. At the end of the current week the gold price stabilized, although experts have recorded its short-term decline amid investors' expectations on the US labor market additional data. The cost gold futures for December on the New York exchange Comex fell by 0.09%, to $1757.65 per 1 troy ounce. Silver futures for December dropped 0.73% to $22.492 per ounce. On Friday, October 8, the XAU/USD was trading at $1762.71, trying to overcome the current range. According to experts, the yellow metal has all chances to overcome the downtrend.


According to The Wall Street Journal, now investors focus on upcoming US jobs reports. Analysts quoted by the edition are confident that the yellow metal could sharply decline to $1720 in case of strong US jobs market data. However, experts say that the release of weak employment reports will trigger a gold rally from $1780 to $1800.

For the last nine months the yellow metal showed a downward trend, though it tried to hold its positions. After two high-yielding years (in 2019 - it went up 18.3%, and in 2020 - it rose 25%), gold for the first time faced a negative yield. According to World Gold Council reports, from late December 2020 to mid-September 2021, ETF gold holdings fell by 3.9%, to 3,603.1 tons. The US supervisory body (CFTC) stated that major players in the precious metal market have reduced their long positions in gold.

The precious metal was previously supported by high inflation. This year there was also a surge of inflation, but gold failed to become a protective asset. According to analysts, gold did not manage to benefit from the situation. During the first nine months of 2021 the yellow metal lost 8.8% in dollar terms. Greenback strengthening played a key role in this issue. Notably, a strong dollar increases gold value for its owners.

Many analysts of the precious metal market are optimistic about the short-term and medium-term prospects of gold. They believe that this asset is facing temporary difficulties. Experts are confident that gold has good chances to rise.

The material has been provided by InstaForex Company -