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Silver’s Ascent - When and How It’s Going to Happen

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Gold & Silver December 2018 to Present

Now that the yellow metal has finally broken above its 1270.00 to 1340.00 trading range, gold bugs can now feel a bit vindicated while short-term speculators can cash-in on their gains.

Despite gold’s dramatic ascent, the rise in precious metals isn’t over. In other words, there’s still plenty of money to be made.

As you probably know, silver hasn’t broken out yet. The gap between gold and silver is quite large, with silver lagging by a wide margin.

But when silver does finally get going, its payout will likely exceed that of gold, by multiples (percentage-wise).

And although silver has gained some ground this month, its advance seems insignificant, enough to wonder whether something might be wrong with its supposed safe haven status.

In fact, many experts are starting to think that the gold/silver ratio is maybe re-setting to reflect a much higher average ratio of gold to silver.

Perhaps. But if you think that silver is done, your timing is off.

The “strange” behavior that you’re seeing in the price of silver is actually quite “normal” for the metal.

Silver prices are known to be much more volatile than gold. Silver lags gold early on during a major precious metals up-cycle. And then it catches up and soars above gold in terms of percentage gains.

As what happened in the years leading up to 1980…

...and to a relative degree in 1998…

...and perhaps the most dramatic upturn since 1980 taking place in the years following the 2008 financial crisis.

In 2009, silver lagged gold for almost a period of two years. But then in 2011, silver skyrocketed, tripling the percentage gains made by gold.

So if silver tends to outperform gold, then what conditions might trigger its breakout?

Silver tends to perform well 1) after a recession, 2) when interest rates are low, and 3) when global economic activity begins to pick up.

In other words, the conditions that are most conducive to silver’s rise are based on a strict set of fundamental factors.

You’ve heard a lot about silver being in short supply. Remember that silver is both a precious and industrial metal. So, despite slowing in silver mining and production, the current slowdown in economic growth and industrial activity hasn’t been favorable to silver.

Silver benefits most during a period of rising inflation and active global industrial activity. And despite being a safe haven, silver demand will decrease when global industrial activity declines (as it is, after all, an industrial metal in addition to being “sound money”).

Even if the gold/silver ratio resets, silver is still bound to rise given the right set of conditions--recession, low-interest rates, and a recovering global economy--all of which make up a natural part of the economic cycle.

Hence, these conditions are bound to repeat time and again. And because these fundamental factors tend to occur slowly over a period of time, you can time your silver purchases with relative accuracy.

For silver investors, what matters is getting positioned in silver well before these conditions take place when silver prices are still trading at a discount, and before a recession actually takes place.

In other words, if you don’t want to miss out on the tremendous gains that silver is about to make in the relatively near-term future, the time to load up on silver is now.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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