From Allen Sykora:
Silver is the weakest of the precious metals this year, losing 7% so far in 2019, with little on the horizon to pull it up aside from any bounce in gold, said UBS. “Gold remains a key driver for silver prices, and therefore lackluster price action has mostly been acting as a drag,” UBS said. “Investor indifference towards gold is amplified even more in silver.” The gold-silver ratio has climbed above 89, the highest since 1993 and representing an underperformance by silver. “This could ultimately attract interest – at the very least from a relative value perspective – but the bar remains high for silver upside catalysts that could trigger a sharp reversal in the ratio for now,” UBS said. “A convincing break higher in gold is likely to revive investors’ enthusiasm towards silver, with the view that there’s plenty of catching up to do. However, although certain macro factors are looking more supportive for gold here (further decline in rates, weakness in equities), the dollar remains strong and broader conditions still appear insufficient to call for a strong bull run for now.” Unlike gold, more than 50% of silver’s demand is for industrial uses, meaning exposure to economic activity. “On this front, silver has met challenges given risks to global growth amid higher tariffs and continued trade tensions between the U.S. and China,” UBS said. “Base metals have similarly come under pressure. Global sales of semiconductors are down sharply, and our colleagues in equities note high inventories amid slower rate of demand in end markets.” Meanwhile, holdings of silver by exchange-traded funds are down by 2%, or 10.95 million ounces, so far in 2019, UBS added.