Silver Up Roughly 18% YTD – Is It Still Undervalued?

Gold is making headlines, surging ahead this month with an impressive 14% increase year-to-date. Yet, in the shadows, silver's performance quietly outstrips gold's, marking a notable 18% gain since the beginning of the year.

When you’re faced with these attractive opportunities, how do you decide how to allocate your funds? How much to gold and how much to silver?

Join us today as we discuss an often-overlooked indicator suggesting that silver, despite its impressive climb already, might still be hiding untapped value, poised for a breakout.

But first, let’s check the latest on the news.

Gold Hits a Different Kind of High
Gold’s popularity among American investors is up. American investors' faith in the precious metal hit its highest level since 2012 last year, and a Gallup poll showed respondents were more confident investing in gold than stocks.

March Inflation Numbers Exceed Forecasts
The CPI surged by 0.4% from the previous month and climbed 3.5% year-over-year, marking an uptick from February's 3.2% annual price increase. This acceleration suggests that inflationary pressures in the economy remain robust, challenging both policymakers and consumers.

Hong Kong Seizes +$10 Million in Gold in Record Smuggling Bust
Hong Kong authorities made their largest gold smuggling bust, confiscating $10.7 million worth of gold cleverly disguised as machine parts destined for Japan. The 146 kilograms of gold were ingeniously molded into shapes resembling screws and cylinders, painted to look like parts of air compressors in an airplane's cargo.

Record-Breaking Gold Rally Goes for Eight Days in a Row
Last week, gold climbed and climbed for eight consecutive days, eventually peaking at $2,360/oz. As of early April, gold is up roughly 13.5% year to date.

Zimbabwe Launches New Gold-Backed ZiG Currency
Zimbabwe is launching a new currency, the ZiG (Zimbabwe Gold), backed by $185 million in gold and other reserves. This initiative represents the country's sixth attempt to establish a reliable currency, following the dramatic depreciation of its previous currency, which lost 80% of its value since the beginning of this year alone.

What historical event is often cited as causing one of the first documented instances of hyperinflation in history?

A. The discovery of the New World in 1492

B. The issuance of paper money in Yuan Dynasty China

C. The Spanish exploitation of silver mines in the Americas during the 16th century

D. The aftermath of World War I in Germany

Scroll to the bottom of this email for the answer...

What is the Gold/Silver Ratio?

The Gold/Silver Ratio is a simple, yet powerful tool used to determine the relative value of gold to silver. It's calculated by dividing the current price of gold per ounce by the current price of silver per ounce.

The Gold/Silver Ratio can signal investor sentiment towards risk. A higher ratio may indicate a preference for gold, seen as a safer investment during economic uncertainty, while a lower ratio suggests an appetite for riskier assets like silver.

A Historical Perspective on the Gold/Silver Ratio

For centuries, the Gold/Silver Ratio has shown remarkable stability.

During the Roman Empire, this ratio was firmly established at 12:1. This balance between gold and silver persisted, with only minor adjustments, well into the modern era. For instance, the United States, from 1792 to 1834, adhered to a bimetallic standard that officially set the ratio at 15:1. A slight adjustment was made in 1834, nudging the ratio to 16:1, which remained in place until 1862.

Even in early 1980, during the finale of the largest precious metals bull market of the last century, the ratio hovered between 15:1 and 17:1.

After the United States left the gold standard, the gold/silver ratio has fluctuated widely. Now, investors often look to the ratio, monitoring it for extremes, in search of clues about potential market opportunities.

Trading the Gold/Silver Ratio

By monitoring the ratio, investors can strategize their buys and sells, switching between gold and silver to capitalize on market inefficiencies.

When the ratio changes dramatically in either direction, the investor buys either gold or silver. For example, in March of 2020 silver plummeted under $13/oz and the gold/silver ratio shot up to an incredible 119:1.

Investors who saw this, reasoned silver was undervalued, and bought in were rewarded handsomely. The price of silver doubled from March to August 2020.

The Gold/Silver Ratio Today

As of this writing, on April 9, 2024, gold is roughly $2,350/oz. Silver is around $28.00/oz.

That would put the Gold/Silver Ratio at 83.7, meaning it would take roughly 84 ounces of silver to buy one ounce of gold.

When you look back at history, that’s incredibly high. This higher-than-average ratio could suggest that silver is deeply undervalued relative to gold – presenting a buying opportunity for investors seeking to diversify their portfolio with silver.

At GoldSilver, we often look to what has happened throughout history as a guide to what the future holds. Returning to the historical averages of the gold/silver ratio wouldn’t be an aberration or an anomaly, it would just be a return to the normalcy of free markets — which have proven over centuries to be a remarkably effective guide.

Mike Maloney, for one, believes the gold/silver ratio could reach or even surpass its historical average, possibly even reaching 1 to 1 — silver valued at the same price as gold.

Mike recently put out a video with Tavi Costa where he lays out exactly where the price of silver is headed.

“We should be seeing the 2011 highs once again, which means silver reaches $48 or so, pretty quickly. Then we’ll see some resistance and consolidation and then we’re going to break that and I believe silver is absolutely destined for triple digits...”

If you share the belief that silver is undervalued, that the market will correct itself in favor of historical norms, now may be an advantageous moment to consider bolstering your silver holdings.

That’s it for this week's edition of GoldSilver Nuggets. We'll be back with more news and updates next week!

Best,

Brandon S.  
GoldSilver

What historical event is often cited as causing one of the first documented instances of hyperinflation in history?

A. The discovery of the New World in 1492

B. The issuance of paper money in Yuan Dynasty China

C. The Spanish exploitation of silver mines in the Americas during the 16th century

D. The aftermath of World War I in Germany

Answer – C. The Spanish exploitation of silver mines in the Americas during the 16th century

This event, known as the "Price Revolution," saw a massive influx of silver (and gold) into Spain from the New World, which led to widespread inflation across Europe. This period is a shining example of how the sudden increase in a currency's supply — through the influx of precious metals in this case — can lead to significant inflation, making it a fascinating topic for those interested in the economics of gold and silver.