Significance Of Silver Outperforming Gold In 2020

May 16, 2020

This Week’s Gold And Silver Prices

Last April retail sales dropped a whopping 14.6%.  Yet the stock market Dow increased 0.25%.  It looks like the majority of investors are inert to any bad news.  Everyone tend to blame the Covid-19 pandemic.  What is really significant this week is that fact that Silver price started to outperform the Gold price.  In other words, Silver is emerging to be a monetary asset next to Gold.

In this article we first review the famous Gold-to-Silver Ratio (GSR) chart.  As we mentioned in our earlier articles, the tops of GSR are associated with dramatic events of wars and recessions.  Then we discuss the two major precious metal stocks. We compare their relative values and their changing roles in 2020.

Gold-to-Silver Ratio Coming Down

There is a sure sign that GSR ratio is decreasing in value after reaching the recent March historical top of 127.  Now it is 120.  The following chart showed the long history.

Chart 1 – Gold to Silver Ratio (GSR) Dropping from Historical High

We anticipated that this time it will bring about big changes in our monetary system.  One big change will be the role of Silver as a safe haven monetary asset.  The big changes will take several years. 

Outperformance of Silver over Gold

Meanwhile in the near-term, we will witness the phenomenon that silver will outperform gold. We will compare two major precious metals company, namely Franco-Nevada (FNV) and Wheaton Precious Metals (WPM).  They are both streaming and royalty companies, with FNV dominated in gold and WPM dominated in silver.  Both stocks are very profitable and favorites of investors in precious metals.

For many years, the gold dominated FNV has outperformed the silver dominated WPM. However this situation is about to change. The following two charts showed the comparison and our forecast of their values for 2020.

Chart 2 – Relative Performance (WPM/FNV Ratio) 2009 - Current

Chart 3 – Forecast of WPM Performance by End of 2020

Summary

We anticipate big changes in the coming years when the US Dollar will not be the only dominant reserve currency in the world.  There will soon be a big monetary reset.

In the near-term, we anticipate that silver will outperform gold.  In the above example of two precious metal stocks, we forecast:

  • Silver Stock Price:  WPM from $45 to $75 (67% gain)  by End of 2020
  • Gold Stock Price:    FNV from $155 to $188 (25% gain) by End of 2020.

These are just examples of relative performance.  There are others.

We are not certified or qualified financial advisors.  Please consult your certified financial advisors for actual trading and investing.

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F.T. Dao is a private investor and recently left the corporate world for technical analysis of stock markets.  He holds a PhD degree in physics and has done technical analysis of the market on the side for many years.  He welcomes constructive discussion and can be reached at:  ftdao245@gmail.com  , ftdao245@comcast.net

1 cubic foot of silver weighs approx 655 pounds whereas 1 cubic foot of gold weighs more than half a ton.

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