Say you’ve made the plunge and purchased some silver and gold. You paid for it, received it, packed it away somewhere safe (no pun intended) and now what? You can wait, you can swap, but when do you sell?
There are always going to be salespeople around that entice you with price targets. “Gold’s going to go to at least…” Call it the greed approach if you want. We call it dangerous.
No one knows the future. We can extrapolate prices based on past performance and adjust that for inflation, but they don’t hand out crystal balls to precious metals dealers the day their website launches. Even dedicated students of markets make mistakes every day because the future is unknown. In truth, no one knows where gold and silver will actually end up.
They don’t. We don’t. But we do know one thing – where the gold/silver ratio will end.
The historical ratio between gold and silver, the ratio they return to at the top of every bull market, is 16:1. That means that it takes sixteen ounces of silver to buy one ounce of gold. Maybe they keep pushing when they hit 16 and push through to 12:1. That’s possible, but if you see gold and silver nearing 16:1 ratio, put your ducks in a row. It’s going to be time to sell very soon.
Yes, there will be significant gains in gold and (even more) in silver by the time we reach this ratio. But nobody knows how much or when. Here’s what we do know –
- Gold and silver are still in a primary long-term uptrend (bull market) that began in either 1999 or 2001.
- The gold silver ratio dropped from this markets’ beginning until its mid-term peak in fall of 2011.
- Gold and silver experienced a prolonged correction that bottomed in December 2015. They did not begin to break out of that correction until May 2019.
- The gold silver ratio will not move in a straight line down, but will bottom at 16:1 or lower.
- To reach the target ratio silver will outperform gold, as it did between 2001 and 2011.
And last, but not least, pay attention to the news. Gold and silver will hit the headlines before the end of this market. But you’ll know their run is over when news reports tout a ‘new age’ or a ‘new economy’ wherein precious metals will never drop.
When you read that, sell as fast as you can.