On the 10th July 2019 we penned an article entitled: Silver Prices Prepare For Blast-Off and concluded as follows:
The last eight years have been dismal for silver and silver miners.
Higher lows are being formed, which is a positive indication of things to come.
Gold has been the center of attention and silver has been left behind. The tide is turning, and silver prices should make some serious gains from here.
In just two months, the tide has turned dramatically as silver prices are now accelerating at a much faster pace than gold prices, although gold is progressing with great gusto.
Today we will take a quick look at the gold/silver ratio and highlight any obvious changes and identify how we can monetize future movements in the precious metals sector.
The Silver Chart For The Past Year
This chart clearly shows that silver has accelerated throughout the summer months from a price of $14.40/Oz in June 2019 to $19.24/Oz as of 4th September 2019, registering a gain of $4.84/Oz or 33.61%. Silver has also formed a series of higher lows which is a positive sign for the future of silver prices. However, it should be noted that from a technical analyst's standpoint the RSI, STO and MACD are all in the overbought zone which suggests that a breather could be on the cards in the short term. Our humble opinion is that any pullback will be short-lived and so waiting for a dip before making an acquisition is riskier than making that acquisition now and riding out the wild oscillations that are sure to accompany this bull all the way to the top.
The Gold/Silver Ratio 1-Year Chart
This ratio peaked at 95 and is now falling fast as silver prices accelerate faster than gold prices. The technical indicators are firmly in the oversold zone suggesting that a bounce could be on the cards.
The Gold/Silver Ratio 20-Year Chart
This visual of the ratio over a 20-year time span suggests to us that the ‘norm’ is around the 60 level. Some would argue that this ratio will revert to around the 15 level which it has been in the past. However, I am not so sure that data that is more than 20 years old is all that relevant but do believe that a medium-term target of 60 is achievable.
It should be noted that when a trend changes, it can swing way beyond the ‘norm’ much like a pendulum before it comes to rest, so a test of the 15 level is not out of the question.
Silver prices are on the move and the momentum is gaining traction. This is not the blast off that we referred to above, it is merely the lighting of the blue touch paper. The upcoming rally in silver prices will be meteoric and take many by surprise.
Gold will also make very good progress but in percentage terms, silver will outperform gold by the time this bull market peaks.
This bull market will be shorter than most expect however, it will be hectic with incomprehensible daily gains and gut-wrenching pullbacks. You will need a strong stomach as there will be sleepless nights when all will look gloomy.
Maintain a position and be prepared to edit or rotate your holdings as and when the opportunities present themselves.
For the record, I do own physical gold and silver and have already placed 80% of my funds allocated for the precious metals stocks and I am considering making more funds available for this purpose.
If you are new to this sector, do acquire some physical gold and silver as a priority and then do the due diligence on the mining stocks creating a short list of your favorite companies. Then do some comparative analysis and whittle out those stocks that you believe can outperform the indices such as the Gold Bugs Index, the HUI.
Be bold and place those trades.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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