Precious metals enjoyed glittering performances in 2019.
Palladium shot up nearly 40%! That’s double the return of the broader markets last year.
Gold surged more than 17% higher! That put it ahead of the Dow Jones Industrial Average and in line with the S&P 500.
And silver was up almost 13% through the first three quarters of the year… though that might be about to change, as you’ll soon see.
During their recent six-year bear market, metals weren’t really worth talking about.
Gold prices peaked at around $1,900 per ounce back in late 2011. They then tumbled 47% to $1,000 in December 2015. And from 2017 until June of last year, the price of gold traded in a range between $1,100 and $1,350 per ounce.
With uncertainty clouding the future of the U.S. and global economies, investors have been looking for solace in gold, palladium, platinum and silver.
Now we’re asking, “Is there any more room for precious metals to run?”
Well, there could be… but maybe not for the traditional safe haven of choice, gold.
You see, something very rare just happened… something gold traders haven’t seen in more than 25 years.
The gold-silver ratio topped 90.
During the past three decades, this has occurred only a handful of times. And none of those were in the new millennium…
The gold-silver ratio is an important metric that metals traders watch closely. It represents the number of ounces of silver it would take to buy a single ounce of gold.
Since 1687, this has ranged between 14 and 100. Though, as you can see from the chart, for much of the past 20-odd years the ratio has bounced between 40 and 80.
We’ve traditionally seen gold pull back when the ratio goes above 80. At the same time, silver tends to rise. So metals traders historically use these levels as pivot points – moving to gold when the ratio falls to 40 and then switching to silver when it goes above 80.
Though, over the past year, the ratio has stayed above 80. And it just keeps marching higher.
Metals traders believe something dramatic has to happen to rebalance the ratio.
When the markets sold off in August, gold and silver both shot higher. Gold soared above $1,550 per ounce while silver topped $19. We’ve since seen declines from both.
From what I’m hearing, no one thinks gold prices are going to collapse. Rather, experts believe silver will rise in price faster than gold, thus bringing that ratio back to historic levels.
That means investors looking for the best returns in their precious metals portfolios should likely focus on silver.
Because going forward, not all that glitters will be gold.
Here’s to high returns,
Matthew
About Matthew Carr
Matthew Carr is the Chief Trends Strategist of The Oxford Club. His unique take on investing – which involves using a strategic system that chooses companies based on pre-momentum, high growth and discounted prices – has led to countless outsized gains.
Matthew cut his teeth in the industry as a writer for the energy trade publications Natural Gas Week, Gas Market Reconnaissance and Oil Daily. He also dug into exports and international trade finance for Business Credit magazine.
With two decades of financial experience under his belt, Matthew’s expertise ranges from classic industries such as retail and oil and gas to cutting-edge markets like 5G, emerging tech, cybersecurity and cannabis. If it’s moving the markets, you can bet Matthew is there.
