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Silver Poised For A Breakout

May 07, 2020 2:45 AM ETiShares Silver Trust ETF (SLV)GLD, IAU, SIVR84 Comments
Nathan Rines profile picture
Nathan Rines


  • Gold and silver are both seen as “safe haven” investments to a degree, with a moderately strong correlation between them as measured by a coefficient of determination (or “R-squared”) of 0.64.
  • Despite the correlation, the gold-to-silver price ratio can vary significantly over time, but logically should be mean-reverting, and generally has been.
  • The ratio is currently at a 100-year extreme, skewed toward gold.
  • Many have argued that despite gold’s recent appreciation, it still has upside. They have a point. Silver appears to have even more upside and less downside.

Investment Thesis

Silver is poised for a potential 40%+ breakout to the upside based on the uncertainty caused by the COVID-19 pandemic and its historically low price relative to gold. Both metals performed very well in the years following the Global Financial Crisis, and while not a perfect analogy, there are enough similarities to support a bullish outlook for both metals today, especially silver.


There’s a lady who knows, all that glitters is gold, and she’s buying a stairway to heaven. When she gets there she knows, if the stores are all closed, with a word she can get what she came for.

- Led Zeppelin

If the aforementioned lady walked down Fifth Avenue today, she would surely notice that the stores are, in fact, all closed, and might wonder if she had finally found her way to heaven. If she managed to find someone to ask, they would likely tell her to put on a face mask. But her more important misconception to us investors is the belief that “all that glitters is gold.” As our mothers taught us, many things that glitter are not good stores of value. But a corollary may also be true today. One thing that glitters like gold, but in a different hue, namely silver, might be a superior investment. This article explores the medium-term upside potential for the white metal and explains why incorporating it into your portfolio could a provide a strong return with limited downside.

Gold and silver are often employed as safe haven assets and are readily available as exchange-traded funds (ETFs) such as the SPDR Gold Trust ETF (GLD) or the iShares Gold Trust ETF (IAU) for the yellow metal and the iShares Silver Trust ETF (NYSEARCA:SLV) and the Aberd Std Silvr Shs (

This article was written by

Nathan Rines profile picture
Individual Investor, MBA, and occasional author focused on macroeconomics and its implications for investors. Investing focus is on expectations for broad asset classes (stocks v. bonds v. commodities, etc.) rather than on picking individual stocks. Also have a day job outside of finance.

Analyst’s Disclosure: I am/we are long GLD, SLV. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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