The gold/silver ratio is back above 80. I mentioned this on the Facebook video this morning. You can see it below. Randy Smallwood, the CEO of Silver Wheaton Corp., says that the last three times the ratio went above 80 and then declined, silver went on to outperform gold by 60 to 302 percentage points over the next two to three years.
Source: Bloomberg
A weaker US dollar supports the argument for a silver rally. But there is a huge supply of above ground silver. If demand for silver is to grow, it’s more likely to come from investors and jewellery than industrial demand. And if gold and silver are both rising (silver faster than gold), well that usually only happens when everything else is going to seed.
Still, it’s well worth keeping an eye on. The “Panama Papers” are beginning to take a toll on European banks, with executives resigning as their names pop up. Banks are already doing it tough with negative overnight deposit rates. The worse it gets for banks, the better it could get for cash and precious metals, which sounds a lot like what happens when you get deflation.
Category: Market updates