When will gold price gains translate into silver momentum?

Which way is the wind blowing for silver prices? It’s been a great summer so far for gold, with prices breaking past $1,400 before a quick pullback and a re-evaluation of modest expectations by year-end. That story has not been the same for the white metal, where market movements have been boring at best and painfully frustrating at worst.

Though one metal has gained over $100 since the start of the June, silver prices have remained stubbornly stuck around $15, facing major resistance at $15.50. Meanwhile, investors are hoping to witness some of the magic that brought it up to nearly $50 an ounce in 2011.

Gold/Silver Ratio Reaches Record Highs

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The sluggishness in movement has caused a record high ratio – how many ounces of the latter metal it takes to buy one of the first. The ratio now stands over 90, an extreme not seen since 1992 when it hit 92.

The historical average for the 20th century is 45, while the average since 1990 has been a higher 65. Pre-20th century, it was closer to 15. Some believe that the less-valuable bullion is simply losing its status as a safe haven investment, a secure place to store value when financial markets hit the rocks. Others believe that a supply crunch and a market in crisis will cause the ratio to close quickly, and silver will vastly outperform other metals, even as they see major price gains.

What Silver Outperformance Looks Like

It’s a situation that the markets have seen before and it tends to only happen during bull markets. The rest of the time, supply and demand push silver one way or another, but never in a big way.

When bullion bull markets start, the ratio begins to close. From 2000 to 2011 (the peak of the last bull market), gold prices grew by 700% between 2000 and the peak in 2011. Silver grew by nearly 800% for the same time period. A similar pattern showed itself in the 1980s precious metals bull market. Unfortunately, more data is not really available due to the price controls on gold in the U.S. until the Nixon Shock allowed it to be freely traded. As far as we know, given the current market context, silver follows gold and ultimately outperforms when there are big movements in commodities.

What leaves investors frustrated is not really having any way of knowing when these movements will begin.

Investing in Collectables

For those frustrated by the lack of movement in the silver market, collectables may be the answer. You can find a huge online collection of silver coins and collectables with investment-grade contents and the conditions that will appeal to coin collectors down the road.

There’s one thing to be wary about: predicting rarity and desirability, two of the key factors in collectable values, isn’t easy. But you always have the security of knowing that when silver prices start to skyrocket, the content in the coins will push their value higher too.

Bullion is starting to move again. Make sure you don’t miss the next bull market and diversify your portfolio today.


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