Is 2019 going to be a year to remember for silver?
Over the past month, the price of silver jumped nearly 10%, from $14.38/oz to $15.78/oz. Many believe silver prices have lagged behind the metal’s true value in the last year or so. Some say economic conditions are becoming more favorable for the precious metals market as a whole. If those things are true, undervalued silver may be positioned to reward investors with the greatest returns of all precious metals in the near term.
Silver vs. Dow Jones Industrial Average, 12/03/2018 to 01/03/2019
(Chart Courtesy of StockCharts.com)
Gold-to-Silver Price Ratio Screams “Buy”
One of the best indicators of a coming good year for silver may be the gold-to-silver ratio, a metric investors and industry analysts rely on to help determine if silver is undervalued.
For those who are unfamiliar with it, the gold-to-silver ratio is a straightforward measurement indicating the number of ounces of silver one ounce of gold can purchase. Gold’s greater scarcity ensures silver will always be the cheaper metal, but when the price disparity between the two grows significantly (the difference between the two per-ounce prices increases), it suggests silver is genuinely undervalued and an excellent buy.
The gold-to-silver ratio is presently around 82, one of its highest points in history (the ratio has averaged roughly 60 over the past 20 years). A higher ratio isn’t a guaranteed indicator that silver prices will rise, but there is no disputing the fact that, in the past, a particularly high ratio has been followed by a sharp rise in the price of silver.
Gold-to-Silver Ratio Since 2000
(Chart Courtesy of MacroTrends)
The ratio’s 2003 peak near 80 was followed by a ratio drop through February 2008 that coincided with a 340% increase in silver’s price. After the ratio roared back up to 80 again late in 2008, that peak was followed by another multi-year ratio drop, with silver’s price soaring 376% through 2011. Even the modest fall from March 2016’s ratio peak matched a 30% jump in silver prices in just four months.
Industry Experts Bullish on Silver’s 2019 Prospects
Niche financial experts are not the only ones who love the gold/silver ratio metric. Plenty of mainstream analysts believe silver is a good investment right now based on the ratio’s current levels. As noted by an article at Commodity Trade Mantra, Johann Wiebe, lead metals analyst at global financial data provider Refinitiv, says based on “the current ratio to gold, silver at present would be a good investment.”
The same piece cites the observation of Steve Dunn, head of ETFs at Aberdeen Standard Investments. At current levels, he said, the metric is not much off its November peak of 86.39, the highest number achieved since 1995.
Silver’s industrial outlook remains promising. But it’s really other market conditions that have investors looking carefully at silver: anticipation of a bull market in precious metals, triggered by the sorts of economic conditions that create robust environments for safe-haven assets.
As analyst Peter Spina puts it, “Once fear and problems emerge in the various bubbles we see around the world…that will eventually cause the next financial crisis. Silver will be one of the havens.” Should these dire economic conditions take hold, Spina says “buying at these prices will look like a no-brainer.”
For his part, Peter Krauth, resident precious metals expert at Money Morning, says a continuing inflation threat combined with “silver’s present extreme weakness relative to gold prices” means silver could be looking at a big year. Krauth thinks silver could go as high as $21.50/oz in 2019, which would be a near-40% increase over its current price.
You may have been aware of silver’s low prices for some time and pondered adding the metal to your portfolio. If so, given the recent jump in the price of silver and its favorable outlook for 2019, you might not want to wait any longer.
Ready to move on a purchase of physical silver for your portfolio? Need answers to your questions about silver ownership? Call Augusta Precious Metals at 855-242-4121 and speak with one of our knowledgeable gold and silver professionals. Remember, too, you can purchase physical silver inside of an IRA. If you’re interested in learning more about buying silver in a tax-advantaged retirement account, ask your Augusta professional about that, as well.