Introduction
The gold-silver ratio is trading at 103.3 (simply divide the current price of gold by the current silver price) which is near its all-time high of 125 reached on Jan 1, 2020 and, historically, when the ratio is this high, silver tends to outperform gold in the following months. The historical average for the gold-to-silver ratio has typically ranged between 50 and 70, meaning silver is significantly undervalued relative to gold at current levels. (Source)
Tariff Implications
Remember, when precious metals rallied in 2020, on the back of lockdowns, interest rates slashed to zero, QE, and general market fear, silver’s gain was double that of gold. The price ran up 43% from January to December, 2020, compared to gold’s mere 20.8% rise. Earlier in the year, as gold punched above $2,000 an ounce, a 39% gain, silver rallied to nearly $30 an ounce, a 147% increase. This could happen again, caused by the current stock market meltdown over Donald Trump’s tariffs that have ignited a global trade war. When stocks are falling like in 2020, and today, panicked investors typically throw the baby out with the bathwater.
A Look Back
Precious metals do particularly well when:
- the dollar is weak,
- the global economy is on the verge of, or in recession, and
- geopolitical tensions like:
- the ongoing war in Ukraine with Russia delaying meaningful progress on talks to stop the war or put a ceasefire in place,
- bombing threats against Iran,
- a possible confrontation between Israel and Turkey in Syria
and drive investors into safe havens. In AOTH’s opinion it’s only a matter of days before people realize how undervalued silver is to gold and start hoovering it up.
Where To Invest
Contrarian investing holds that the time to buy is when there is blood in the streets. Silver is below $30/oz and the largest silver ETFs, such as the iShares Silver Trust (SLV), Global X Silver Miners ETF and the Amplify Junior Silver Miners ETF were all hammered this past week.
As for individual stocks, there aren’t a lot of pure silver play juniors to choose from but consider Silver North Resources (TSXV:SNAG, OTCQB:TARSF) here.
