As tidal waves of new currency flood the global financial markets, some of the smartest thinkers in the world are growing concerned about currency debasement.
The proposition is relatively simple — the more currency we create, the less valuable each specific unit of that currency is.
And that means if your wealth is exclusively tied up in that currency, you’ll be getting poorer.
In recent Digests, we’ve highlighted gold and cryptocurrencies as a way to help safeguard your wealth.
But those aren’t your only options …
Today, we turn to our global macro investor, Eric Fry, to tell us more about another wealth-storehouse.
Even better, its risk-reward set-up right now is suggesting 75%+ gains if this asset’s traditional relationship with gold returns to normal.
Before we turn it over to Eric, a quick reminder …
This coming Wednesday at 4:00 PM ET, Louis Navellier will be holding a special event called the Accelerated Income Project. In short, he’ll be talking about the market today, where it’s going, and how to use a numbers-based system that identifies compressed periods of hypergrowth from select, elite stocks.
It’s a free event — just click here to reserve your seat. Hope to see you there.
And now, on to Eric.
Have a good weekend,
Why Rich Men Are Buying the “Poor Man’s Gold”
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 2000s, 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”
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 past is prologue, the silver price could gain momentum soon and begin soaring higher … a lot higher.
The silver-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 silver price 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 traded 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 1980s, 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.
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 (SLV). Because this $6 billion exchange-traded fund (ETF) 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 (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.