Sceptics will be less interested. They will argue that physical silver offers no yield and comes with a cost of ownership, such as storage and insurance, which means there is a negative carry relative to cash and bonds, where the benchmark Bank of England base rate and 10-year gilt yield stand at 3.75pc and 5.2pc to 5.4pc – depending on the day – respectively.
Bears will add that the lack of yield means valuing the metal is nigh-on impossible and thus argue its intrinsic value can only be measured relative to the AISC of producing it. In the case of Fresnillo, the world’s largest silver miner, this was $32.90 an ounce across the 22 million ounces of the metal mined in Mexico in the first six months of this year, far below its sale price.
One of this column’s all-time favourite explanations of financial markets – how cycles work and how investor psychology drives them – is the one provided by Sir John Templeton, the fund management legend.
“Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.”
This decade already offers plenty of examples of such cycles, from bottom to top and back again, ranging from cryptocurrencies to non-fungible tokens to meme stocks. Only time will tell whether precious metals join them.
