Silver to outperform gold, historical ratio suggestsPosted on — Leave a comment
Standard Chartered and the Silver Institute both have issued predictions that global silver production is set to shrink in the coming year and beyond.
Now another major bank, Societe Generale, is making the same forecast. It is predicting that supplies of newly mined silver will drop 9.2% this year and 13% in 2017.
This dearth is partly because the output of base metals also has shrunk, and silver is often recovered as a byproduct of mining operations that are primarily seeking zinc, copper, lead, and the like.
Well continue to see mine cutbacks this year and that will play into the hands of silver, Saxo Bank strategist Ole Hansen told Bloomberg. This will give silver its long overdue attention.
High ratio signals crisis: Meanwhile, the gold-silver ratio or the number of ounces of silver needed to buy a single ounce of gold continues to hover around 80, give or take a few notches.
In modern history, the gold/silver ratio has only been this high three other times, all periods of extreme turmoil the 2008 crisis, Gulf War, and World War II, Zero Hedge noted.
Not only does a high ratio signal potential crisis conditions, but its also a bullish signal to buy silver.
As of Monday, the gold-to-silver ratio just fell below 80, and the last three times that happened silver outperformed gold by 60 to 302 percentage points in the next two or three years, Bloomberg reported.
25% jump in annual silver Eagle sales?: Investors who watch this ratio have been piling in. Silver American Eagle bullion coin sales have topped 13 million for the year, despite the U.S. Mint continuing to allocate, or ration, coins to its authorized network of wholesalers.
Silver analyst Steve St. Angelo went so far as to predict that silver Eagle sales will likely jump by 25% in the first quarter due to deteriorating market conditions. There are two weeks remaining in March and the U.S. Mint will likely sell another 2 million.This will put total silver Eagle sales for the first quarter at 15 million the highest ever.
With 47 million silver Eagles sold in 2015s record-breaking year, 2016 could prove to be another, even bigger milestone for the Mint. Now is the time to invest in silver, when the ratio is signaling a potential move higher for poor mans gold.