Our Money Morning resources expert Peter Krauth explained the reasons behind gold's fall, so we went back to him to find out the deal with silver prices. Will silver keep falling? Is it a buy at the lower levels?
Here's what Krauth offered for investors.
Money Morning Staff: Peter, are silver prices falling because gold fell, or are there other factors at play here?
Peter Krauth: There are two factors.The first is that silver follows gold rather closely, and usually amplifies its behavior, both up and down. However, it can and does sometimes detach from gold and behave independently, but this is more of a rarity.
The second is silver's industrial demand.
I believe is a factor that I think does affect the silver price in the current environment. Silver does have more industrial uses than gold, so there are some different price drivers.
While silver's industrial demand will help support the price, the recent selloff likely is in sympathy with the lower-than-expected Chinese gross domestic product (GDP) growth which, for the first quarter this year, came in slightly below at 7.7% rather than the expect 8%.
MM: For anyone interested in investing in silver now that the price has fallen to lower levels, what's a better buy: physical silver, or silver-related stocks?
Krauth: I'd recommend both. Buy physical silver to establish a lower risk base position. Then investors can augment that position by buying quality silver stocks that offer considerable leverage to the silver price.
MM: The CME Group, the parent company of the main metals and energy exchanges in the United States, changed on Monday the gold and silver margins by 19% and 18%, respectively. What effect will this have on further gold and silver price movements?
Krauth: I think that raising margins right now will simply provide additional headwinds to immediate gold and silver price gains.It could help push both precious metals somewhat lower in the short term, since futures buyers/owners will have to put up higher amounts to control the same quantity of gold and silver than previously. But over time I expect the effect to diminish, and those margins are likely to come down again.
Final Note from Krauth: One other thing I'd like to address is that throughout this selloff, I mean going back the last few months, we've seen very strong silver coin buying.
The U.S. Mint has sold 2.22 million ounces so far in April, which is on pace to exceed the 3.37 million and 3.36 million in March.So far this year, sales have reached 16.44 million, easily outpacing the 11.66 million for the first four months of last year.
It's very telling that even with falling silver prices, people are stepping up their buying.And the premiums are high around $4 per American Silver Eagle, indicating very limited supply.
My take is they're seeing better value as the price falls.
For more information on all the factors at play with silver prices, as well as info on how to buy physical silver, check out this special Money Morning interview with local precious-metals dealer Rich Checkan.