SMM News: precious metals have performed quite well in the past few months, but gold has outperformed silver. Both are rising, but gold is rising even more, and the resulting imbalances are likely to be one of the main investment themes in the coming years.
Since the 1960s, the ratio of gold to silver, that is, how many ounces of silver it takes to buy an ounce of gold, has rebounded. But when the ratio is extremely high (say, above 80), silver will perform better than gold, and sometimes the gap will be significant.
Recently, the ratio has reached almost 93, not far from the all-time high. With precious metals finally breaking five years of silence-and the world economy is getting worse-it is not surprising that safe havens are favored. At the same time, as central banks resume easing and geopolitical tensions persist, it will not be surprising if precious metals continue the current rally.
Analyst John Rubino believes silver and its mining companies are looking better, given the chaotic, loose global environment and relatively cheap silver prices.
The chart shows the performance of First Majestic Silver (AG, (large silver production company) shares over the past month. Even if silver underperformed gold, the company's shares rose 40 per cent. If silver outperformed gold in an all-round bull market for precious metals, such mining stocks would rise in a parabola.