Precious metals have entered a volatile trading range in recent weeks.
Gold has support at roughly $1,265-per-troy ounce, give or take a few dollars. Meanwhile, you’ll find resistance for the yellow metal at $1,290-$1,295.
For silver, the trading range has been a bit wider, from roughly $16.80- to $17.30- per-ounce. Watch this range closely in the weeks ahead. A breakout above resistance will be very bullish, and a break below support bearish.
Mining shares have been weaker than gold since the peak in early September. So, it’s important to also keep an eye on the relative strength of mining stocks (using GDXJ as a proxy) vs. gold. As we get closer to the next turn date, I would expect this trend to reverse with miners outperforming gold once again.
What is particularly interesting is the fact that silver has been outperforming gold over the past month, a bullish sign. And I expect this could be just the beginning of a long stretch of silver outshining gold. Here’s why …
The chart above shows the gold-to-silver ratio stretching back to the very beginning of this secular bull market in precious metals in 2000. As you can see, the ratio swings wildly up and down.
When the ratio is at a low, at or near the bottom of this chart, it tells you gold is cheap relative to silver. And when the ratio is high, near the top of the chart, it means silver is undervalued compared to the price of gold, as it is right now.
But here’s the best part … in the past, a high gold-to-silver ratio has been a very reliable buy signal for silver. Let’s look at the stats …
* The first extreme high in this ratio was in 2003, and silver jumped 77% over the next 12-months, and went on to surge 290% over the next five years!
* A second extreme reading was in 2008, and silver soared 470% in less than three years, far outdistancing gold.
In late 2015, just as precious metals were bottoming, we got a third extreme reading, plus the ratio is still very near that extreme today. This tells me silver is poised to outshine gold in the years ahead.
That’s where the biggest gains can be made in the next phase of the precious metals bull market. That’s the reason I recently recommended you add ProShares Ultra Silver (AGQ) to your Gold Mining Millionaire portfolio. Plus, Sabina Gold & Silver (SGSVF)should likewise outperform during the next big move coming soon.
Plus, I have my eye on a handful of outstanding junior silver miners from our watch list that look primed to surge higher as well. They include Americas Silver Corp. (USAS) and Endeavour Silver Corp. (EXK) among others. Expect a batch of new recommendations on these and other silver stocks when the time is right!
Meanwhile, continue to hold your open positions and stay alert for more updates and analysis coming your way soon.
Happy Thanksgiving and good investing,
Mike and Sean