Due to the reckless expansionary monetary policies of Central Bank money’s value is diminishing at a staggering rate. The Federal Reserve announced at the start of the year the “release” of US$2 trillion into the markets to help with the economy to weather the storm. It is semantics but the US$2 trillion doesn’t actually exist and when the Feds say “release” they mean they will print US$2 trillion. Nowadays they don’t even need to bother with printing they just press a button. When the money is circulation is diluted to such an extent it is no wonder that people will flock to other asset classes that are better at storing value such as precious metals such as Gold and Silver.
The Federal Reserve has and continues to manipulate the gold and silver markets through the likes of JP Morgan, Goldman Sachs and the other big Wall Street banks; by depressing the prices of precious metals it gives them the ability to continue printing money. The Feds generally prefer to short the silver market because it is significantly smaller than the gold market therefore the amount of money they need to expend to short the silver is significantly less than the amount of money they need to short the gold market. Because the price of gold and the price of silver has always been in lock step if the Feds can depress the price of gold by depressing the price of silver. The romans locked the ratio of Gold to Silver at 1:12 and the French in the 18th century locked it to 1:15. However, in the last few months the Gold to Silver ratio went over 1:100 which is unprecedented; the only explanation is that the Feds was able to depress the price of silver but not Gold’s. The Gold market is much bigger so it is harder to manipulate so the price is more represented by the forces of supply and demand than manipulation. Using techniques such as smackdowns and sudden margin calls the Feds have been able to depress the price of silver but this is about to change and silver will eventually get back to a normal ratio with gold between 40-70.
Today the price of gold reached US$ 2,000/oz which means the price of silver should trade at between US$ 28/oz to US$ 40/oz. This will no doubt happen in the near future and silver will catch up with the price of gold.
The uncertainties with the coronavirus, the potential conflict in the South China sea and the negative growth of many economies means that Gold and Silver will continue to be winners at least for the next 6 months with silver out-performing gold because the Feds will find it untenable to continue depressing the price of silver.
At this time, Gold and Silver are the choice store of value and investors should seize this moment to hedge against inflation by investing in Gold and Silver.
Other resources recently that point to a continuation of the bull run:-