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Hi ! Ho ! Silver: The Other Precious Metal Hits11Month High
In the precious metals space, there are two metrics that can be used to fine tune your approach and holdings. The gold/silver ratio and the gold/XAU ratio.
The first- the gold/silver ratio has historically been around 1/17 with one ounce of gold worth seventeen of silver. In fact, this is what happened in the Hunt bull market in the late 70's. Gold tripled from around $300 to $850 and silver went from below $5 to $50. Note they topped out at 1/17. Also note that silver went up tenfold. During the Big Bonanza bull from 2002 to 2011, gold went from around $300 to $1800 while silver went from around $4 to $45. Note that the leverage is still there but the ratio is about 1/45 or so. Right now the ratio is 1/73. This would point towards overweighting silver relative to gold.
The gold/XAU ratio is an historic metric showing the relationship between the price of bullion and the bullion mining stocks. Now it's easy to understand why bullion and mining stocks would track each others performance, but realize they are traded in different markets and can diverge from each other for various and sundry reasons. This divergence, or convergence is measured by the gold/XAU ratio. Before the advent of ETF's, 5 was the demarcation with under that pointing towards overweighting bullion to miners and over that calling for overweighting the miners to bullion. Whelp, the ETF's have skewered the metric way higher and I'm not sure the wizards have reset the bar, but currently the ratio is over 15. That screams at me to overweight the miners relative to bullion.
This tells me the greatest potential leverage is with the silver miners.
Note that in each of these cases, we're talking about overweighting silver and the miners . . . but only 'overweighting'. This doesn't mean you don't own gold bullion in some form. Just that you own a bit more than you might otherwise, in silver. You own a bit more of the miners, via most every pm mutual fund in existence. I met one guy that actually bought silver and gold at the ratio amounts. But that's being a purist.
Why silver is running right now? Geez, I don't know. Most of it is probably because of the dollar falling relative to gold.
However, and this is what matters. I don't care why silver miners are going nuts. I just watch Captain Price and follow his lead. I own SVM, EXK and AG and it's getting fairly obscene. And I like it.
Until last weekend the weather had been dreadful, but not like other parts of the country where they're getting hammered. I love Mother Nature dearly, but she can be quite contrary at times. My neighbors just started cutting their grass - the barbarians.
BTW, my basement sale purchase of XOM is actually in the green +6%. However, my SQM buy is doing very well. I like this stock. It's one of the few pure lithium plays. Growth plus a 2.6% yield. Why don't you buy a Tesla?
The silver juniors? feh. Peter Lynch 101 - play what you know. I've collected coins for 60 years and this looks like it just might be my third rodeo. We'll see.
Yeah I hear ya. Crazy stuff going on here as well - had a handful of days in the 70's and then back down below freezing for a week and now back up in the 60's. No climate change stuff happening around here don'tcha know. And yes, despite all the excellent advice I was given to sell my MLP's and invest in some decent bond funds I didn't listen and instead dove in head first and doubled down during the January lows. Now I'm sitting on these silly 40-50% gains that I don't know what to do with. Maybe I'll take a bath in the goo.
Comments
Good article.
Note that while silver jumped 4.2% the silver miners went nuts. [aside - haven't we been down this road before?]
http://www.kitcosilver.com/equities.html
In the precious metals space, there are two metrics that can be used to fine tune your approach and holdings. The gold/silver ratio and the gold/XAU ratio.
The first- the gold/silver ratio has historically been around 1/17 with one ounce of gold worth seventeen of silver. In fact, this is what happened in the Hunt bull market in the late 70's. Gold tripled from around $300 to $850 and silver went from below $5 to $50. Note they topped out at 1/17. Also note that silver went up tenfold. During the Big Bonanza bull from 2002 to 2011, gold went from around $300 to $1800 while silver went from around $4 to $45. Note that the leverage is still there but the ratio is about 1/45 or so. Right now the ratio is 1/73. This would point towards overweighting silver relative to gold.
The gold/XAU ratio is an historic metric showing the relationship between the price of bullion and the bullion mining stocks. Now it's easy to understand why bullion and mining stocks would track each others performance, but realize they are traded in different markets and can diverge from each other for various and sundry reasons. This divergence, or convergence is measured by the gold/XAU ratio. Before the advent of ETF's, 5 was the demarcation with under that pointing towards overweighting bullion to miners and over that calling for overweighting the miners to bullion. Whelp, the ETF's have skewered the metric way higher and I'm not sure the wizards have reset the bar, but currently the ratio is over 15. That screams at me to overweight the miners relative to bullion.
This tells me the greatest potential leverage is with the silver miners.
Note that in each of these cases, we're talking about overweighting silver and the miners . . . but only 'overweighting'. This doesn't mean you don't own gold bullion in some form. Just that you own a bit more than you might otherwise, in silver. You own a bit more of the miners, via most every pm mutual fund in existence. I met one guy that actually bought silver and gold at the ratio amounts. But that's being a purist.
Why silver is running right now? Geez, I don't know. Most of it is probably because of the dollar falling relative to gold.
However, and this is what matters. I don't care why silver miners are going nuts. I just watch Captain Price and follow his lead. I own SVM, EXK and AG and it's getting fairly obscene. And I like it.
Take care,
peace,
rono
Until last weekend the weather had been dreadful, but not like other parts of the country where they're getting hammered. I love Mother Nature dearly, but she can be quite contrary at times. My neighbors just started cutting their grass - the barbarians.
BTW, my basement sale purchase of XOM is actually in the green +6%. However, my SQM buy is doing very well. I like this stock. It's one of the few pure lithium plays. Growth plus a 2.6% yield. Why don't you buy a Tesla?
The silver juniors? feh. Peter Lynch 101 - play what you know. I've collected coins for 60 years and this looks like it just might be my third rodeo. We'll see.
take care and good fortune,
rono
You too, be careful out there.