Silver - A Sleeping Bull


  • Underperformance in 2019.
  • 2020 starts with another disappointment compared to gold.
  • Silver has industrial and financial properties.
  • Sentiment and investment demand will drive the price higher.
  • USLV on dips in a bull market.
  • Looking for more stock ideas like this one? Get them exclusively at Hecht Commodity Report. Get started today »

Over 5,000 years ago, the first Egyptian Pharaoh Menes stated that two and one-half parts silver equal one-part gold. At that time, and throughout most of the history that followed, gold and silver have served as stores of wealth, currencies, and means of exchange.

In modern times, since the 1970s, the average level of the relationship between the two precious metals has been around fifty-five ounces of silver value in each ounce of gold value. When the ratio between the metals is below the 55:1 level, silver is historically expensive compared to gold. At levels above 55:1, silver becomes historically cheap.

As of the close of business on January 17, it took 86.33 ounces of silver to purchase an ounce of gold. The last time the ratio traded at the 55:1 level was back in 2013. While gold recently traded at its highest price since 2013, silver has continued to lag the yellow metal on the upside. If silver is going to play catch up with the price action in the gold market, the Velocity Shares 3X Long Silver ETN product (USLV) will magnify the price action in the silver market on the upside. Silver could be a sleeping bull at the $18 per ounce level.

Underperformance in 2019

Gold appreciated by 18.87% in 2019, while silver moved 15.32% higher on the year.

Source: CQG

As the chart of the silver-gold ratio highlights, the number of ounces of silver required to purchase an ounce of gold moved from 82.56 at the end of 2018 to 84.92 on December 31, 2019. The relationship was at 86.74 on January 24.

Meanwhile, despite its double-digit percentage gain last year, silver was the worst-performing precious metal that trades on the COMEX or NYMEX futures exchanges. Platinum gained 22.05% in 2019, and palladium moved an incredible 59.48% higher. Rhodium, the platinum group precious

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This article was written by

Andrew Hecht profile picture
Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website and blogs on his own site He is a frequent contributor on Stock News-

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.

Additional disclosure: The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

The author is long silver

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