Investing.com - Silver and Gold: Why Being Late is Great

May 28, 2020

Article by Korbinian Koller in Investing.com

Normally the word late has a negative connotation. Not in this case. The historical fact that silver is lagging gold can be used as an edge for investors. Being late is great. Not needing to be first translates into less risk. Gold being in a secular bull market makes it pricey to attain. Silver prices in comparison are just starting to rise. Typically, Silver outperforms Gold later down the road. It moves later but overall it moves further and faster.

This isn’t all. Did you know that recovering Silver in most cases isn’t worth the effort? While Gold gets “refurbished” out of all kind of junked tech items, Silver isn’t. This means it is lost and its overall supply diminishes over time.

At this moment of time it takes about 100 units of Silver to purchase one unit of Gold. The monthly Gold/Silver-Ratio chart illustrates that nine years ago it took only 31 units to accomplish the same purchase.

Relationships like these rarely stay long in extreme measurements like the two mentioned.Consequently, it is quite reasonable to assume that we will at some point find ourselves near the 200 moving average, a value between those two extremes more likely in the future. Once Silver which is always late and lags, catches up with Gold’s extension, this medium Gold/Silver-Ratio zone will be reached. This means there is a force in place driving Silver prices still higher.

It is this urgency of Silver to catch up even on the smaller time frames, that leads us to take aggressive entries. Most think after a move from $11.63 to $17.62 (a +51.46% move) From mid-March till now, one would be late to the party. Then again, being late is great. Once the bullet train is in motion there is no reason to be timid.

It seems that in the investment world it is best to be in early. Get data ahead of the crowd. Be prepared early. And all of this is true of course. And then again, in this specific case betting on the less shiny option versus Gold is a grand opportunity.

History has shown that Silver, more often than not, has outperformed Gold in a bull market at a later stage ....

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