(Sponsored Content) When gold runs, silver typically lags for a period. But when silver plays catch up, it tends to do so with a vengeance. This lag, which can unwind like a coiled spring, is creating a tremendous value and upside opportunity for patient silver investors today, writes Bill Musgrave with Dana Samuelson, vice president and president, American Gold Exchange Inc.
Gold is now trading at about 25% above its 2011 peak of $1,900 while silver is trading at 33% below its 2011 peak of $48.60. Silver is extremely undervalued relative to gold right now, but this situation is unlikely to last long.
As you can see on the 20-year chart below, silver is testing a breakout as we speak, moving above $30 and probing higher levels. The blue circle shows this breakout test. Silver has moved firmly over $30, but not by much, at least not yet. In fact, the recent move over its 2020 peak of $29.42 was the first indication of a nascent breakout.
Gold made a similar breakout test last December, moving over $2,070 to just under $2,100 twice. Then, in April, it punched sharply past $2,100 to $2,400 in less than a month. If you look at the small blue circle on the 20-year gold chart below, you can see this breakout test. We anticipate silver making a similarly large leap higher, and soon.
A pattern of major surges
Silver has a history of major advances following gold breakouts, as evident in the silver chart above. For example, in early 2009, gold was $775 an ounce while silver was under $10. By mid-2010, silver gained 100%, doubling to just under $20, then surged another 150% in less than a year, reaching a peak of $48.60. During this period, gold doubled in price to $1,550. But silver, with a slight delay, quintupled in price, gaining 400%!
More recently, in the summer of 2020, another major silver advance occurred under similar circumstances. From January to August, gold rose 33%, from $1,550 to $2,069. Silver channeled around $18.50 from January to June, then surged to $29.26 by August for a 58% gain.
Gold-to-Silver Ratio strongly favors silver
On the Gold-to-Silver Ratio chart below, you can see silver already trying to catch up to gold, narrowing the range from 91:1 down to 77:1 today. But the current ratio of 77:1 is still historically high, meaning silver is still substantially undervalued relative to gold.
The Gold-to-Silver Ratio is considered in equilibrium at 65:1. In other words, when the gold price is 65 times the silver price, the two metals are considered fairly valued relative to each other.
When the ratio is above 65:1, gold is outperforming silver. When it drops below that level, silver is outperforming gold. Whenever the ratio hits 82:1 or higher, silver is considered extremely undervalued and likely to outperform gold going forward.
If this ratio simply returns to its historical equilibrium point of 65:1, basis gold at $2,435 recently, the silver price would be $37.50, 19% higher than today. But even bigger rises from silver are reasonable to expect as the Gold-to-Silver Ratio narrows, as we’ve seen twice since 2008.
Between 2008 and 2011, the ratio narrowed from an extreme high of 84:1 down to a low of 32.1 when gold rose from $775 to $1,535 and silver dramatically outpaced it, surging from $9.17 to $48.70. The Gold-to-Silver Ratio also fell sharply after the ratio hit an all-time high of 125:1 in March 2020, following the Covid outbreak. Within five months, silver gained 130% while gold gained 35%.
This is what we mean by silver lagging gold and then playing catch-up with a vengeance. And we think silver is poised to do it again, now that it is testing a breakout over $30.
Silver's time is coming
Market supplies of US 90% silver coins are back to normal for now and premiums are at cyclical lows, making US 90% silver quarters one of the best buys in the market today!
With inflation falling, the Fed has signaled it will pivot to rate cuts in 2024, most likely in September. Market anticipation of this pivot recently helped to propel gold to a new all-time high. Silver has lagged, pushing the Gold-to-Silver Ratio heavily in silver's favor.
Once again, silver is poised to play catch up. While gold could easily gain 10% to 20% in the next 12 to 24 months, silver could surge 20% to 50% or more from today's undervalued levels, especially as the Gold-to-Silver Ratio reverts toward equilibrium at 65:1.
Investor Alert!
In anticipation of silver surging, we are excited to offer a fantastic opportunity in bulk silver. Pre-1965 US 90% silver quarters, one of the most popular silver items we carry, are trading at their lowest premium over silver content since March 2020, when Covid changed everything.
For a limited time, we’re able to offer bags of 90% silver quarters at a special low price of just $0.99 over spot. This special pricing applies to quarters only. We do have dimes and half dollars available at a slightly higher premium, but supply is very limited. Once we sell out of existing stock, prices will return to normal.
If you want inexpensive, trading-sized silver coins for emergency barter or simply for good value, they really don't get cheaper than these!
We urge you to take advantage of this special offer of US 90% silver coins. Our discounted cache of quarters will not last long, so get 'em while you can. Give us a call at 1-800-613-9323 or visit www.amergold.com and we'll be happy to help you.
To learn more about American Gold Exchange, please visit Amergold.com
