Silver’s Been Rallying, But It’s Still Cheap When Priced In Gold

Silver’s Been Rallying, But It’s Still Cheap When Priced In Gold
Jonathan Hobbs

11 months ago2 mins

Silver’s been on a tear these past few months – rallying about 37% since its $17.56 per ounce low last September. And if you price silver in the equivalent amount of gold, it's up about 20% over that time. So the question is, could this be the start of a bigger uptrend, where silver takes gold’s top spot at the podium for a while?

This chart shows the price of silver divided by the price of gold – or how many ounces of gold you’d get for trading in an ounce of silver. It dates back to 1970, and as you can see, silver is currently cheap compared to the yellow metal by historical standards. You can also see that silver’s low in September was higher than the one it saw during the March 2020 Covid crisis (yellow dotted line) – signaling it could be looking to start a new uptrend for the first time in a long time.

And there could be a good reason for its timing. With interest rate hike expectations cooling off, investors have started to favor precious metals over yield-paying assets like bonds again. (I wrote more about that here). The shift in investor behavior could continue to be good for gold, and very good for silver. See, silver has generally outperformed gold during gold bull markets – albeit with a lot more volatility. It’s a much smaller market, and the twin forces of more speculation and lower liquidity often lead to bigger price swings (in either direction, of course).

Like gold, silver’s been a store of value for thousands of years. But unlike gold, it has a wide range of manufacturing applications – and it's a key component of electric cars and solar panels. So, if you think the recent run of interest rate hikes is running out of steam, and if you see more of us going green, you could consider buying the iShares Silver Trust (ticker: SLV; expense ratio: 0.50%). Or, if owning the physical metal is more your thing, you can buy and store silver through platforms like Bullionvault.



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