- Are you in on the new gold rush?…
- A historic investment opportunity — and it’s not gold…
- Trump said he’s “not joking” about running again…
Dear Reader,
The dollar has shrunk over 10% within the past two months.
The prevailing explanation runs this way:
Investors have fled the dollar due to the president’s tumultuous tariffs.
They have piled into “safe haven” gold in search of tranquility.
I hazard the prevailing explanation is a sturdy explanation.
The New Gold Rush
Some $80 billion went pouring into gold exchange traded funds (ETFs) in the year’s opening quarter.
$8 billion funneled in last week alone — the largest weekly deluge ever.
And the medal of Midas trades presently above $3,400 the ounce.
That figure is, even adjusted for inflation, a record height… higher even than its 1980 peak of $800.
Meantime, gold has outglittered the S&P 500 by some 30% year-to-date.
Has gold attained peak shine? Do not depend on it, argues FXStreet:
- Trump’s back-and-forth tariff announcements have weakened investors’ confidence in the US economy. Adding to this, Trump’s attack on Federal Reserve (Fed) Chair Jerome Powell raised doubts about the central bank’s independence and keeps the US Dollar (USD) bulls on the defensive.
- This, along with the prospects for more aggressive policy easing by the Fed, favors bullish traders and suggests that the path of least resistance for the non-yielding Gold price is to the upside.
The Mounting Case for Gold
A certain Ross Norman — an independent analyst — adds that:
- Gold is recalibrating to reflect what can only be described as epic changes in the global financial system. And those changes are a widespread and fundamental shift in confidence in the world’s reserve currency and its bond markets…
- It is hard just now to see a scenario where gold could correct sharply lower as a physical floor of Johnny-come-lately buyers would support or cushion the decline.
Meantime, BullionVault’s Adrian Ash cites robust central bank demand:
- [Central bank demand] is very likely chasing gold’s move higher, because Trump 2.0’s chaos only hardens gold’s appeal as a geopolitical asset.
The seers of Goldman Sachs — incidentally — project gold scaling $4,500 should trade woes worsen.
Should you join the gold stampede?
Too Bad I Don’t Give Investment Advice
Unfortunately for you, my dear reader, I do not dispense investment advice.
Why is it unfortunate?
Because if you noted my counsel… and placed the precisely opposite trade… your success rate would near 100%.
I am tempted to claim your success rate would equal 100%. Yet even my gobsmacking record of imperfection is not itself perfect.
As the blind squirrel wanders upon his rare acorn, I too may wander upon a profitable investment.
The odds would nonetheless weigh vastly in your favor.
You may thus liken me to CNBC’s inestimable Mr. Jim Cramer.
Unlike that anti-oracle, alas, I do not recommend investments.
Yet may I put in a word for gold’s junior sibling — silver?
A Historic Imbalance
I hazard silver presently offers substantial space on the upside… and limited space on the downside.
I refer you to the gold-to-silver ratio, so-called.
The gold-to-silver ratio counts the number of silver ounces required to fetch one gold ounce.
The gold-to-silver ratio runs presently to 105-1 — 105 silver ounces gets you your gold ounce.
As history goes, a ratio of 60-1 is approximately par.
Thus the gold-to-silver ratio is fantastically askew.
On only three previous occasions has the gold-to-silver ratio exceeded 100.
These were during the plague year of 2020, briefly in the 1990s and the Great Depression.
Today the ratio once again exceeds 100.
$150 Silver?
Mr. Stefan Gleason presides over Money Metals Exchange.
He believes today’s extreme ratio “presents a historically extreme undervaluation of silver versus gold.”
He adds that:
- Silver now presents a vastly better investment opportunity than even gold, as long as one’s investment horizon is more than a few months… investors who prioritize silver purchases over gold — or outright swap gold for silver — tend to be handsomely rewarded in the medium term as the ratio reverts to the mean.
And that:
- At the last gold bull-market peak in 2011, the gold-to-silver ratio fell to 32. As an example, if the gold price rises to $5,000, that would imply a move in silver to roughly $150 an ounce.
Whack
As newsletter writer and author Bill Bonner is fond to say:
“Things that are very out-of-whack tend to get back into whack.”
The gold-to-silver ratio is very out-of-whack. Thus I expect it to get back into whack.
Perhaps not entirely into whack — yet reasonably into whack.
And even a partial return to whack would yield a handsome return.
Consider the abovesaid plague year of 2020.
Silver soared over 37% in the six months following May. Handsome!
Gold, meantime, lagged far behind silver at 10%.
BullionVault’s Adrian Ash — also referenced above — believes silver may excel gold by a factor of 3:1 in the days to come.
Really Out of Whack
I noted above that in real, inflated-adjusted metrics, gold presently trades at record heights.
Yet by the identical inflated-adjusted metrics, silver is miles and miles behind gold.
Silver summited at a nominal $49.45 in 1980. Yet its real, inflation-adjusted price scaled $966.
Silver trades presently at $32 the ounce.
Thus silver’s real inflation-adjusted record high soars 30 times higher than the current silver price.
“Things that are very out-of-whack tend to get back into whack.”
The Perfect Investment Opportunity
Meantime, the Silver Institute reports that silver demand exceeds silver supply.
It places this year’s silver deficit at perhaps 117 million ounces.
Inadequate supply meeting excessive demand writes the recipe for increased prices.
Thus I speak my piece for silver.
And so I deliver you — on a platter of silver — the ideal investment opportunity.
You need merely wager your final cent against silver… and reap your wondrous windfall as silver plummets.
And if you have to borrow the money to do it? Then I encourage you, strongly, to borrow it.
It will repay you in infinite multiples.
For that priceless investment advice, you are very, very welcome.
Brian Maher
for Freedom Financial News
