The silver-gold ratio has climbed back above 80-1. This has historically signaled silver on sale.
As I write this article, the ratio stands at just over 80:1. That means it takes just over 80 ounces of silver to buy an ounce of gold. To put that into perspective, the average in the modern era has been between 40:1 and 50:1.
The analysis last month showed that selling exhaustion may be near in the gold market. Since then, gold continues to be range-bound between $1750 and $1800 running up against both solid resistance and support. Meanwhile, silver has shown a mini-breakout.
The $1800 level for gold is in play this week and could open the door for a big move if it gets through it soon.
The silver-gold ratio has ballooned again, indicating that silver is once again a bargain buy.
During a gold bull market, silver typically outperforms gold. We saw this during the big runup in the price of both metals through the early months of the pandemic. In the third quarter of last year, silver charted its best quarter since 2010, finishing up 27.62% through the three months ending Sept. 30. Going back further, silver spiked 106.6% off its March 2020 low.
Silver just charted its best quarter since 2010.
The white metal finished up 27.62% through the three months ending Sept. 30. Taking the timeline back a bit further, silver is up 106.6% off its March low. And there are plenty of reasons to believe the silver bull-run will continue.
Silver wrapped up a strong August pushing above the key resistance level of $28 an ounce on Monday.
While gold charted a slight dip of about 0.4% last month, silver was up just over 18%. On Tuesday morning (Sept. 1) the white metal was knocking on the door of $29 an ounce.
The price of silver broke above $28 an ounce Thursday morning.
In the last 30 days, silver has gone up by nearly 54%. On the year, the white metal is up over 71%.
Even with these big gains, silver remains historically undervalued compared to gold.
On July 21, we reported that silver had powered above $20 an ounce and was at a six-year high. The very next day, the white metal blasted through $21 an ounce and was approaching $22. So what does silver’s breakout really mean? Peter Schiff talked about it in his podcast.
The price of silver has surged along with gold over the last few weeks and has pushed above $19 an ounce. But the white metal continues to lag behind gold with the silver-gold ratio at over 94-1. This is a historically wide spread and it is telling us that silver remains way undervalued. At some point, you would expect that ratio to close, meaning silver has a long way to run up.
Fundamentals in the silver market also look bullish for the white metal with increasing demand and a squeeze on supply. Investment demand for silver was up 10% in the first half of 2020, according to the latest data compiled by the Silver Institute.