Even though gold’s price is just about to rise to new heights, silver has been trading sideways since the beginning of the year. Will silver’s price start catching up to the yellow metal?
Silver’s performance has always been related to gold’s performance. In order to understand the prospects of silver, first we need to see gold’s prospects for the year. A breakout in gold could mean the substantial rise for silver’s price. It has happened before it may well happen again.
Will the gold rally continue?
Gold performed well in 2016, 2017 and is expected to do the same in 2018. I do not expect gold to get over the $1500 mark this year even though there has been many reports for gold reaching the $10000 mark by 2020. I do not share those views but I do believe the fundamentals are there for gold to continue to rise over the next 5 years. Yes gold behaves bullish but at the end of the day, the gains will be 8% to 15% per year. Over a five-year period I do not see any other investments that will provide steady returns to that level and silver is bound to follow gold.
The fact of the matter is that the primary investment assets, stocks, bonds and real estate, are all in bubbles. As if this is not enough, the new trend, cryptocurrencies are also in bubbles. Most analysts including me believe, most bubbles are likely to explode this year.
At the same time the possibility of a trade war between the US and China is there alive and real. North Korea is adamant to continue with its nuclear project, the Middle East is burning and the UK is negotiating the terms of Brexit.
Global uncertainty and market uncertainty are both looming. Gold’s price is correlated to most major asset classes. It is more likely to rise when stock markets crash. We all know gold responds when uncertainty and fear sneak back into the economy and markets. The next event that causes financial instability could actually be the spark that kick-starts the next surge.
Will silver follow gold?
Gold to silver ratio is over 80:1 right now when for the whole of the 20th century the average silver to gold ratio 47:1. Silver is already below its 2016 high and is currently battling its 200 day moving average. That’s fine with me. Silver always lags and under performs gold until gold gains momentum or breaks key resistance. A major breakout in gold this year could have a major effect in silver’s price.
If and when silver breaks its 2017 highs, we can declare its bear market over (in terms of time). Silver has often rebounded after long and bad bear markets.
Is silver undervalued?
In my opinion silver is highly undervalued and thus, silver could over perform gold this year. I expect silver to gain 30 to 50 cents as soon as the gold rally starts. And if silver gains momentum it could actually reach the $20 mark by the end of the year.
An investor’s duty is to be alert at all times and to be prepared for shifts like that one. This way we can protect and preserve hard-earned family wealth.