The perfect time to buy silver to make tidy profit? The historic ratio says so....

As a complete hypocrite, and to totally contridic a previous blog I wrote on why the gold to silver ratio will continue to grow, today, I'm going to talk about why SILVER may actually be the break out precious metal in the next few weeks to months. In my previous post, I talk about how the slow down in the world's economy can only mean one thing for silver price and how the gold to silver price ratio will only continue to increase. As much as 88% of silver is used in non-monetary applications—jewelry, industrial, silverware, religious objects, etc., implying demand would fall for those items in an economic pullback.

With less and less silver now needed by industry, due to the slowdown, the over supply of silver will continue to keep the price of silver low, as gold becomes the safe haven everyone should run to. Plus, after reading a Bloomberg article the other day, which explained that this year is the 8th year of oversupply for silver. These large stockpiles of silver are another part of the reason that silver prices have remained relatively subdued due to gold prices.

Take a look at the gold/silver price ratio and you can see that gold is trading at all time highs in relation to silver.

If silver is over supplied, why does it keep being mined?? This is easy to answer... Well, this is because silver is always the bridesmaid, but never the bride. Silver is often mined as a byproduct of copper and gold mines, and since these metals are always in high demand, silver will continue to be flooded on to the market.

Wanted gold, but found silver!! Ok, put it in the silver pile. The silver pile has grown and it is still dug up even as demand falls as it is a byproduct. Silver may only be the bridesmaid, but when gold is the real bride silver wins too. Silver has a very close relationship with gold and as more and more fiat floods in to the precious metals sector, the draw of "cheap" silver, relative to gold, could see a bull run on the shiny, silver metal.

As Mark Twain is often reputed to have said: “History doesn't repeat itself but it often rhymes”.

The gold price has climbed in response to Covid-19 headlines, while silver has not. Gold ended the first quarter of 2020 up 5.6%, while silver fell 22.8%. In fact, it was silver’s worst quarter since 2013. Perhaps this is not surprising: investors rushed to gold as fears of the black swan event spread, but since that event was deflationary they didn’t turn to silver.

It may take inflation to reverse silver’s lagging performance and begin to outperform gold, or perhaps some other monetary event, but what I do know is that if the ratio does not reverse it would be the first time in history.

With that said, with a modern historic (1968-2020) gold to silver ratio of around 68:1, and since the price of gold doesn't look to be plummeting anytime soon, it leaves silver only heading in one direction. The implication is that silver prices are due a correction higher based on the ratio.

FULL DISCLAIMER - I AM NO FINANCIAL ADVISOR, PLEASE DO YOUR OWN DUE DILIGENCE.

I am predicting that as gold continues to increase in value, gold's ascendancy will drag silver higher along with it. In the short term, I see silver making up some ground on gold, like I said, as fresh fiat comes flocking to the safe havens that is the precious metals market, and look for cheap investments, silver will benefit from currently being so undervalued to gold. So this is where I'm currently putting my hard earned fiat and will continue to do so as long as the market situation remains the same, until a massive correction in the gold to silver ratio happens.