Investors look to the historic gold/silver ratio gap
While gold gets all the limelight, silver has been on a bull run of its own, up a staggering 125% since the March 2020 low and even outperforming gold. As impressive as this is, several indicators would suggest this is just the start of a new silver bull run.
Silver has been on a bull run since the March low – Now at USD 27.03/oz
Source: Trading Economics
Past silver bull runs took silver as high as USD 35/oz in 1980, and then to almost USD 47/oz in 2011. The interesting thing about the current 2020 silver bull run is that demand from industry has been subdued due to COVID-19. Once industrial silver demand comes back there is every reason to suggest silver will push even higher.
In 2019 global silver demand was up just 0.4% to 991.8 Moz, as higher net physical investment was offset by lower jewelry and silverware demand. It looks like this trend is continuing in 2020 as investment demand for silver (and gold) reaches unprecedented levels. According to ETF Monitors the ETFS Physical Silver (ETPMAG) is 2020’s top performer of all ETFs, with a YTD return of 53.3%, well ahead of ETFS Physical Gold (GOLD) of 30.3%.
Physical silver ETF is the best performing sector YTD in 2020
Source: ETF Monitors (as of August 11, 2020)
The gold/silver ratio
The current gold/silver ratio is ~72 (gold US$1,951/silver US$27), meaning gold is worth 72 times the value of silver. Yet the average gold/silver price ratio during the 20th century is only 47:1. If we apply at 47:1 ratio that would mean silver should be at US$41, which would be 56% higher than today. All of this means that despite a ‘sterling’ 2020 performance of +53% , silver could still have another 56% upside to be back at an historical normal ratio to gold.
For investors the message is that any silver pullbacks still represent a buying opportunity. For investors wanting a greater leverage to the silver price then they should consider the silver miners. Here are some junior silver miners we follow closely at InvestorIntel.
Canada Silver Cobalt Works Inc. (TSXV: CCW | OTCQB: CCWOF)
Canada Silver Cobalt Works is developing three 100% owned, past-producing, high-grade silver-cobalt mines in the prolific Northern Ontario Silver-Cobalt Camp. Canada Silver Cobalt Work’s flagship Castle Mine and 78 sq. km Castle Property features strong exploration upside for silver, cobalt, nickel, gold and copper including exceptionally high grade veins of silver. The Company has released a strong maiden resource estimate for the Castle East Robinson Zone. The result was Zones 1A and 1B have an average silver grade of 8,582 g/t (250.2 oz/ton) in a combined 27,400 tonnes of material for a total of 7,560,200 Inferred ounces of contained silver using a cut-off grade of 258 g/t AgEq. After adding in the lower grade Zone 2A the total is 7,567,000 inferred ounces of contained silver. You can read more here.
Angkor Resources Corp. (TSXV: ANK)
Angkor has a very large land package entailing 983 km² in Cambodia with multiple prospects focused on gold, silver and base metals. Added to this is their oil and gas exploration license known as Block VIII (7,300 km² concession) also in Cambodia. Angkor has a successful history of project generation and partnerships with exploration success. You can read more here.
CBLT Inc. (TSXV: CBLT)
CBLT is a mineral exploration company and project generator/deal maker with numerous projects in Canada. Their focus has been on cobalt and silver, with a bit of gold, copper and PGMs. CBLT’s Copper Prince Project is their flagship project located within Falconbridge Township, in the Sudbury Mining District of Ontario, Canada. You can read more here.
InvestorChannel’s Silver Watchlist Update for Thursday, August 13, 2020
Given the tremendous silver price surge in July/August 2020 it would not be unusual to see some short-term silver price pullback on profit taking. However any pullback should be looked at as a possible buying opportunity when considering key factors to determine the silver price, namely the strong investor demand and soon industrial demand to return, the gold/silver ratio of 72 suggests silver can rise relatively to gold (historical ratio is 47). Of course, further money printing and ultra-low interest rates are creating a very favorable market for all precious metals.
Investors have the choice of buying physical silver or the silver miners. For more information, have a look at the InvestorIntel silver watchlist, our gold, silver, and base metals page.