Precious metals are on course to close the week on a very bullish note. The spot price of gold has hit a fresh 7 ½ year high, touching $1,749.80 in intraday trading.
Meanwhile, the price of silver is soaring. Silver is presently up over 4% on the day, trading at $16.52. Silver has significantly outperformed gold in recent trading sessions.
This recent price action has taken the gold/silver price ratio from a 5,000 year high of more than 120:1 down to ~105:1 today.
Dynamic Wealth Research has been banging the drum for silver going back to our March 20th article:
Silver was trading at $12.59 at the time of that article. The article concluded with the following message.
Here’s one more reason why investors may not want to dismiss the late-week bounce in the price of silver as merely “a blip”. The gold/silver price ratio.
Earlier this week, that ratio hit an all-time extreme of over 125:1. This compares to the historic price ratio (over a span of 4,000 years) of 15:1.
When bullion markets are in genuine “rally” mode, silver always outperforms gold. The gold/silver ratio as of market close on Friday? 119:1.
Subsequently, silver has jumped by 30% in the past seven weeks.
Less than a week after that article, we ran another piece alerting investors to the historic investment opportunity in silver.
We framed the long-term investment picture for silver.
How high can (should) the price of silver soar as price discovery finally comes to the silver market? Just look to the historic gold/silver price ratio.
For over 4,000 years, that ratio averaged 15:1, reflecting the natural supply ratio of the two metals in the Earth’s crust (17:1). But (relative to supply) humanity has had a slight preference for silver over gold.
Today, 4,000+ years of accumulated silver stockpiles are gone
. Silver is currently only being mined at a 9:1 ratio versus gold. Market equilibrium today dictates a fair market price for silver at a ratio of no more than 9:1 versus gold (and arguably even less).
Gold is currently priced at $1616 per ounce, but (like silver) at that bargain-basement price, inventories of physical gold have also dried up. Much higher gold prices
This implies a fair market price for silver today of well over $150 per ounce
– and rising.
With the price of silver at $16.52 (even after its 30% jump), this is still the ground floor for investors.
Gold and silver were in a long-term trough (~8 years) before the recent economic and financial crisis created a massive surge in demand.
Gold and silver mining stocks ended 2019 priced at all-time lows in relation to metals prices.
This was a market primed to explode. Now the current pandemic (and its economic, monetary, and financial consequences) has lit the fuse.
The gold market appears to be early in a new major rally. As we noted in an article yesterday, price predictions (from legitimate gold bulls) range from $2,000+ up to $8,000 - $9,000 per ounce.
But the real money to be made here is in silver.
Coming out of the 2008 Financial Crisis, silver was a mere 6-bagger. It went from a low of approximately $8 per ounce near the end of 2008 to a peak of over $49 per ounce in the Spring of 2011.
Silver begins this rally much more undervalued – as evidenced by the record gold/silver price ratio. The monetary policies of the central banks and the fiscal policies of our governments are much more extreme today than during that previous financial crisis.
Going for gold? That’s fine.
However, in this race, holding silver definitely does not mean settling for second place.