Silver Charts Biggest Single-Day Gain Since 2016

Gold pushed above $1,500 again Wednesday (Aug. 7) and silver joined the party, charting its biggest single-day gain in nearly three years.

Silver surged 73 cents on the day for a 4.4% gain, closing above the key $17 level for the first time since January 2018.

Silver has gained about 9.3% on the year.

Continued trade war woes and more central bank easing helped drive both gold and silver higher.

New Zealand’s central bank cut interest rates by 50 basis points to 1.50%. According to a Reuters report, the move caught markets off guard. As a result, the Kiwi plunged as much as 2.1% against the US dollar. The Reserve bank of India dropped rates for the fourth straight meeting, and Thailand’s central bank also initiated a surprise rate cut.

Meanwhile in the US, Chicago Fed President Charles Evans hinted at more Fed rate cuts.

You could take the view, as I have, that inflation alone would call for more accommodation than we put in place with just our last meeting. You might take the view that things have perhaps created more headwinds against that, and it would be reasonable to do more.”

Jerome Powell insisted the July rate cut wasn’t the beginning of a long easing cycle, Peter Schiff said Powell was right. That’s because it won’t take long to get to zero.

It doesn’t have a lot of ammunition to cut rates, and so I think we’ll get to zero relatively quickly. And we’ll stay there until the Fed completely loses control of this thing.”

Analyst Edward Moya told MarketWatch he expects the rally in gold and silver to “roll on” especially when the Fed cuts rates again.

Gold captured the $1,500 an ounce level and the rally seems set to roll on as no one is expecting any immediate progress on the trade front and the proactive easing efforts from central banks globally. When the Fed capitulates later this month that could be the catalyst to support the drive towards the $1,650 an ounce level.”

Silver’s big move up is a good sign for both the silver and gold market. The white metal began to play catch-up with gold in mid-July. After pushing close to 93-1, the silver-gold ratio began to close as silver rallied. At the time, Peter said this also indicates to him that the bull market in gold is about to kick into a higher gear.

One of the aspects of the bull market that hadn’t kicked in was silver. You see, normally in a bull market in gold, silver outperforms. I mean, it happens in every bull market, but it hasn’t happened yet. And what I’ve been saying is the reason for this is I think a lot of investors were still very skeptical that we were in a bull market. They were concerned that the breakout was going to be false. They didn’t believe it, so they were not really buying silver.”

Now they are buying silver.

As Peter has pointed out, we have all the elements in place for a gold bull market and historically, silver outperforms gold in this environment.

At the time of this report, the silver-gold ratio was at 87.7-1. While this is a healthy improvement from the 93-1 levels we were seeing early last month, it’s is still a significant spread. Keep in mind, the modern average over the last century is around 40:1. This tells us that silver remains significantly undervalued compared to gold. In effect, we still have silver on sale. If you look at how cheap silver is compared to gold, the upside has probably never been this great.