- InvestingHaven: On the relationship between gold and silver and historical silver rallies
- Kitco: Gold is the superior safe haven in a world of rising debt, high inflation, and recession risks
InvestingHaven: On the relationship between gold and silver and historical silver rallies
InvestingHaven discusses in its article ( 11.6.2023) The detection of the gold-silver price ratio and the correlation between silver price rallies. The gold-silver ratio compares the ounce prices of gold and silver and has shown significant fluctuations over time. The article emphasizes the observation that whenever the ratio rises to the 80-100x range, the price of silver increases significantly.The text mentions four notable instances when this observation occurred: in 1991, 2002, 2009, and 2020. In each case, when the gold-silver ratio exceeded the 80-100x range, the price of silver rose significantly. These events demonstrated the potential for substantial returns and the importance of identifying trends in the precious metals market.
The article also highlights the most recent occurrence of this observation during the COVID-19 pandemic in 2020, when the gold-silver ratio again rose to the 80-100x range, leading to a significant silver price rally. This reinforced the previously observed trend and supported the idea that the gold-silver ratio can serve as an indicator for silver price movements.
The author concludes that the current gold-silver ratio, which has remained above 80 times since 2022, suggests that silver is undervalued compared to gold. Although the ratio is not a timing indicator, it indicates, according to the author, that the price of silver is likely to respond positively sooner or later.
Kitco: Gold is the superior safe haven in a world of rising debt, high inflation, and recession risks
A "perfect storm" is developing in the gold market as the Federal Reserve maintains a tight stance and the global economy struggles with high interest rates, rising inflation, and increasing debt, writes Kitco ( 20.6.2023). Tavi Costa, the portfolio manager at Crescat Capital, believes in the significance of gold as a diversifier in investment portfolios, which will ultimately drive the price significantly above $2,000 per ounce. Costa sees three risks supporting gold prices in the global economy: the potential insolvency of the U.S. government, the Federal Reserve's tightening, recession-inducing monetary policy, and the selling pressure in the bond markets caused by the U.S. debt level. He notes that an inverted yield curve, where short-term rates exceed long-term rates, has historically been a signal to buy gold and sell the S&P 500.Foreign buyers of U.S. bonds are currently at their lowest in 19 years, while the U.S. government needs to issue about $1 trillion in new debt to replenish its reserves. Costa believes that as interest rates rise and the supply of debt increases, the Federal Reserve may ultimately have to become the last buyer. In this scenario, tangible assets like gold are likely undervalued at just $2,000 per ounce.
While some investors are avoiding precious metals, central bank purchases of gold continue to remain strong, indicating the importance of holding neutral assets amid growing volatility in currency markets. Costa emphasizes that gold's share of global reserves is small compared to historical averages, arguing that central banks will need to buy $3.2 trillion worth of gold to return to these levels. He also points out that gold is undervalued relative to other markets, even though its value has dropped 6% from its record highs.
To manage growing uncertainty and risks, Costa recommends creating balanced portfolios. He suggests an allocation of about 30% to equities, 20% to fixed income, 30% to gold, and 20% to a broad commodity basket.
In summary, Costa predicts favorable prospects for gold due to global economic risks and undervaluation compared to other assets. He urges investors to consider including gold in a diversified portfolio amid increasing uncertainty and market volatility.
