On 27 March 1980 the silver market collapsed. Panic swept the financial markets and there was a fear that several brokerage firms may collapse. To avert this a consortium of banks provided a line of credit of over $1bn to two brothers. The brothers were called Hunt and they had tried to corner the silver market.

Silver may not be as popular as gold as a store of wealth, but come the zombie apocalypse it may well be more useful than gold as a medium of exchange.

But how does it stack up as an investment?

Here we will look at two aspects of sliver: its seasonality and relationship with the stock market.

The following chart shows the average price returns for gold by month since 1963.

Silver($) monthly return average [1963-2015]

While the next chart shows the proportion of months that have seen positive returns.

Silver($) monthly return positive [1963-2015]

It can be seen that silver has been historically strong in January, February, July and September, and weak in June, August and October. This profile of behaviour would seem to have some persistency as the same pattern can be seen for the period 1990-2015.

Silver and equities

The following chart shows the ratio of the FTSE All Share Index to silver since 1968. (One can regard the chart as the UK equity market priced in silver.)

FTSE All Share Index-Silver [1963-2015]

The ratio peaked at 662.60 in April 2001 and then fell to a low of 65.05 in April 2011 after which is has been steadily falling in price against stock prices. Since 1963 the ratio average is 205.25.

Note: There are several silver ETFs/ETNs listed on the LSE, for example: PHAG($), PHSP(£), SLVR($), XSIL($), SILG(£).

Extract taken from the newly published The UK Stock Market Almanac 2016.

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