On Friday, gold and silver did something for the first time in two years!
That provides a great trade opportunity for you.
Let me provide some background.
The DG Value Funds were up 2.7% for the third quarter, with individual fund classes ranging from 2.54% to 2.84%. The HFRI Distressed/ Restructuring Index was up 0.21%, while the HFRI Event-Driven Index declined 0.21%. The Credit Suisse High-Yield Index returned 0.91%, and the Russell 2000 fell 4.36%, while the S&P 500 returned 0.58% for Read More
The relationship between the price of gold and silver varies. Multiple sources suggest there is about 17.5 times as much silver as gold in the earth’s crust. On its own, this suggests the gold price should be about 17.5 times that of silver.
However, the ratio isn’t this low … and hasn’t been for some time. People prefer to hold gold instead of silver.
But you should still consider silver for your portfolio. For one, it’s less expensive than gold. And sometimes the relationship between the two metals gets out of whack.
I believe today is one of those times…
Gold vs. Silver
Based on history, if you invest in silver today, you should earn 10% profits over the next year and nearly double that over the next two. And that may be conservative.
Though gold is roughly 6% as common as silver (1 divided by 17.5), it regularly trades at a premium to that level. In fact, since 1980, the gold price has been about 62 times greater than that of silver:
I am writing today to alert you to an uncommon event that just occurred. The ratio of the price of gold and silver just reached 80.
This is rare. Since the year 2000, the ratio has only exceeded 80 on 54 trading days, or about 1% of the time.
The last time the ratio eclipsed 80 was February 2016. After the ratio peaked three trading days later, the silver price increased 40% over the next five months.
I can’t guarantee you that will happen this time. But it is likely the price of silver will move higher versus gold over the short term.
History shows that since 1980, silver outperforms after the ratio between the gold and silver price reaches 80. The silver price moves up by 10% over the next year and by almost 19% over the next two.
The last time this happened, the silver price was still 25% higher one year after its February 2016 peak.
How to Take Advantage of This Phenomenon
You can exploit this by visiting a trusted coin shop to buy physical silver. This is a great option, but some people don’t want the hassle. (I promise it’s really not very hard.)
You can purchase silver in your trading account as well. Two liquid names you can buy are the Sprott Physical Silver Trust (NYSE: PSLV) and the iShares Silver Trust (NYSE: SLV).
As I write, both of these names trade at about a 3% discount to the value of their holdings. That means you can buy a dollar’s worth of silver for about $0.97.
There is no such thing as a free lunch, but sometimes the market hands investors something very close to one.
I suggest you consider taking advantage of this today.
Senior Analyst, Banyan Hill Publishing