In Depth Silver Analysis

Gold and silver have remained in a long consolidation phase with no indication at this time when that may change. Meanwhile, Ahead of the Herd published this in depth look at the long term prospects for silver which remain solid. Below is an extract from the conclusion of the report.

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Conclusion

"As stated at the top, the correlation between gold and silver since 1975 has been 0.8876. The 10-year correlation coefficient is 0.7511. However this year, the correlation has dropped significantly to 0.1959.

Despite the weaker correlation between silver and gold prices this year, only 0.19 compared to the normal 0.88, silver followed gold downward in June, after a US Federal Reserve meeting suggested that the Fed could reduce its $120 billion monthly bond-buying program. Silver mining stocks, particularly producers whose fortunes are closely aligned with the silver price, saw a correction.

They remain deeply undervalued. How undervalued?

Precious metals commentator Adam Hamilton recently crunched the numbers. Analyzing second-quarter earnings from the top 15 silver miners in the leading SIL Global X Silver Miners ETF, Hamilton found that production surged 16.9% year on year, pushing Q2 earnings up by an astounding 472.9%! He writes:

Such incredibly strong earnings in the face of sentiment-battered stock prices have fueled extraordinarily-cheap valuations in some of these silver miners. Out of the 12 companies in the SIL top 15 that have cumulative earnings over this past year, 5 now have trailing-twelve-month price-to-earnings ratios way down in the teens or even single-digits! High-flying silver stocks almost never get this undervalued, it is amazing."


Read the full silver analysis on Ahead of the Herd here


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