Monetary Metals’ Fundamental price seeks to back out speculative forces in the silver market to reveal the underlying physical supply and demand picture. The degree of divergence between the market price of silver and the Fundamental price is, in our opinion, an indication of market exuberance or pessimism.
The Fundamental price is computed according to a model based on our economic theory. We believe that this model reflects the forces of supply and demand in the physical market however there is no guarantee that the market price will move to the Fundamental price quickly or ever.
This chart shows the degree to which the market price diverges from the Fundamental price. Positive values indicate that market prices are above our Fundamental price and this “premium” is shown in red as it reflects our opinion that the silver price may be overvalued. Negative values indicate that market prices are below our Fundamental price and this “discount” is shown in green as it reflects our opinion that the silver price may be undervalued.