If you’ve been thinking about adding more gold positions to hedge your portfolio, you might want to think about also buying some silver.
During the four major gold bull markets of the last 50 years, silver has outperformed gold by a large margin. In each case, silver lagged significantly behind gold during the early years of the bull market. But when all was said and done, silver’s gain towered over gold’s.
During the early 2000’s, for example, the gold price advanced more than 40% while the silver price fell.
But from that point forward, silver rocketed 1,000% — far outpacing gold’s gains.
And it bears mentioning that both of these metals delivered those dazzling performances while the stock market was producing losses. Perhaps history is on the verge of repeating itself.
Waiting for the “Crack” in Gold
During the last two years, the gold price has gained more than 30%, while silver has fallen more than 10%. This situation is just as it should be.
Silver always lags behind gold at the beginning of big moves in precious metals.
In fact, I think of silver as being the tail end of a whip.
During the early stages of a bull market, its price usually falls, or moves sideways, as the gold “whip” starts to fly ahead. But eventually, silver reverses direction to follow gold, picks up momentum at an amazing rate and delivers a “crack” of powerful gains.
Therefore, if the past is any indication, the price of silver could gain momentum soon and begin soaring higher … a lot higher.
The silver-to-gold ratio provides one fascinating insight into silver’s speculative appeal. As the chart below shows, this ratio has fallen to its lowest level of the past 20 years. In fact, it has dropped to its lowest reading of the past 50 years!
So if the price of silver simply rose to its average level, relative to gold, it would climb to about $27 an ounce — a 75% gain from a recent price of $15.40.
However, if gold traded back to its record high, and silver also traded back to its average ratio, silver would soar to about $31 — or more than double its current price.
Of course, if a powerful silver rally kicks into gear, the price likely would not stop at $31 an ounce. Silver’s all-time high of $50 would beckon next.
A Speculation Worth Making
That said, silver is forever and always a speculation. Because it is neither completely an industrial metal nor completely a precious metal, its price movements are fickle and volatile.
But these qualities are part of its allure. Silver is capable of achieving both epic advances and equally epic collapses.
During the 1980’s, for example, its price plummeted 95%. And recent history taught us that lesson once again, as the silver price tumbled more than 70% from its 2011 high to its low in 2018.
Because of dismal results like these, silver can fall out of favor with investors for long periods of time.
But we cannot forget that silver is one of the few assets that can shine when storm clouds are hanging over the stock market. Historically, both silver and gold have tended to move up when stock prices move down.
And I am expecting history to repeat itself over the next couple of years.
That’s why I’ve been recommending select gold-focused trades to my subscribers for more than a year.
These trades have delivered excellent results so far, and I expect all of them to build on their initial gains as the gold bull market gains momentum.
But for investors who wish to take a bigger — and more speculative — bite out of the precious metals pie, silver offers an appetizing opportunity.
One easy way to participate in any future silver rally is to buy the iShares Silver Trust (NYSEARCA:SLV). Because this $6 billion exchange-traded fund is a proxy for physical silver, its share price tracks the silver price nearly tick-for-tick.
Alternatively, traders who want to take on additional risk could buy the ProShares Ultra Silver ETF (NYSEARCA:AGQ), which uses leverage to produce double the returns of silver, for better or worse.
But remember, silver is a speculation. So if this volatile white metal makes you a little nervous, just stick with gold.
P.S. If you pay attention to the news, you might think the novel coronavirus and the horse race between Joe Biden and Donald Trump are the only big stories out there. However, the media is totally missing what is by far a bigger election year story.
You see, an alarming new trend taking shape in America is making a lot of people really wealthy … and at the same time making others poorer. I believe this will be the No. 1 factor affecting your money over the next few years. If you haven’t seen this or heard about what’s happening in your hometown, I strongly encourage you to learn what’s going on. I can show you exactly what’s happening.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south. Eric does not own the aforementioned securities.