Gold-Silver Ratio Says Now Might Be The Time To Buy Silver Juniors

The gold-silver ratio is trading near its all-time high of 125 reached on Jan 1, 2020. As of this writing, it now takes 102 ounces of silver to equal the value of one ounce of gold. The historical average is around 60.

To find the ratio, simply divide the price of gold, currently at $3,020 an ounce, by the current silver price of $29.33.

Gold Trading Economics

Silver Trading Economics

Historically, when the ratio is this high, silver tends to outperform gold in the following months. The historical average for the gold-to-silver ratio has typically ranged between 50 and 70, meaning silver is significantly undervalued relative to gold at current levels.

Historical gold-silver ratio. Source: Macrotrends

Undervalued silver poised for explosive move higher — Richard Mills

In an interview on CapitalCosm, precious metals analyst Peter Krauth cited instances where silver prices tripled within a few years and mentioned silver companies that witnessed gains of 16 times and 17 times their share price within a two to three-year period.

The author of ‘The Great Silver Bull’ thinks a new bull market in silver will be driven by inflation, rising interest rates and the impact of the Trump tariffs. He sees the current economic climate as similar to the 1970s when silver prices skyrocketed amid high inflation.

Remember, when precious metals rallied in 2020, on the back of lockdowns, interest rates slashed to zero, QE, and general market fear, silver’s gain was double that of gold. The price ran up 43% from January to December, 2020, compared to gold’s mere 20.8% rise. Earlier in the year, as gold punched above $2,000 an ounce, a 39% gain, silver rallied to nearly $30 an ounce, a 147% increase.

This could happen again, caused by the current stock market meltdown over Donald Trump’s tariffs that have ignited a global trade war.

When stocks are falling like in 2020, and today, panicked investors typically throw the baby out with the bathwater.

Precious metals do particularly well when the dollar is weak, the global economy is on the verge of, or in recession, and geopolitical tensions like the ongoing war in Ukraine with Russia delaying meaningful progress on talks to stop the war or put a ceasefire in place, bombing threats against Iran, a possible confrontation between Israel and Turkey in Syria are driving investors into safe havens.

In AOTH’s opinion it’s only a matter of days before people realize how undervalued silver is to gold and start hoovering it up.

I’ve always said the best leverage to a rising commodity price is a quality junior with experienced management, an excellent property located close to infrastructure and a workforce in a mining-friendly jurisdiction, and a resource estimate with room for expansion.

Of course the commodity being pursued is key to success. In the case of silver, the fundamentals are bullish due to demand forecasted to outstrip supply for the foreseeable future.

Silver, like gold, is a precious metal that offers investors protection during times of economic and political uncertainty. 

However, much of silver’s value is derived from its industrial demand, opening up the possibility of tariffs on silver. It’s estimated around 60% of silver is utilized in industrial applications, like solar and electronics, leaving only 40% for investing.

The lustrous metal has a multitude of industrial applications. This includes solar power, the automotive industry, brazing and soldering, 5G, and printed and flexible electronics.

A report by Oxford Economics commissioned by the Silver Institute found that demand for industrial applications, jewelry production and silverware fabrication is forecast to increase by 42% between 2023 and 2033.

Total silver supply should decrease by 1%, meaning 2024 should see another deficit, amounting to 215.3Moz, the second-largest in more than 20 years. (full-year numbers will appear in The World Silver Survey 2025, to be released on April 16).

2024 is the fourth year in a row that the silver market would be in a structural supply deficit.

Silver to log fifth straight year of deficits: a look at the top 5 country producers — Richard Mills

At the end of January, The Silver Institute reported that industrial demand is on track to post a new record. Supply will increase, but not by enough to avert a 2025 deficit — the fifth year in a row.

Contrarian investing holds that the time to buy is when there is blood in the streets. Silver is below $30/oz and the largest silver ETF, the iShares Silver Trust (SLV), was down 6.85% at time of writing, Friday morning PST. Endeavour Silver and Pan American Silver fared worse (-10%). The largest silver producer in the United States, Hecla, dropped 11.2%.

The Global X Silver Miners ETF and the Amplify Junior Silver Miners ETF were both hammered, losing about 9% as of this writing.

As for individual stocks, there aren’t a lot of pure silver play juniors to choose from. Here’s one…

Silver North Resources (TSXV:SNAG, OTCQB:TARSF) 

“Our success rate in drilling new targets has been pretty good”: Silver North’s CEO Jason Weber, on making discovery after discovery after first-time drilling.

Silver North Resources in November announced the Main Fault discovery at its Haldane silver project within the historic Keno Hill Silver District in the Canadian Yukon Territory.

Drilling confirmed that the Main Fault, marked by a series of silver-bearing surface showings, is a productive structure hosting multiple high-grade silver-bearing veins and breccias. 732 meters of drilling was completed in three holes testing the West Fault and Main Fault targets.

The 8,579-hectare Haldane property is located 25 km west of Keno City, YT, adjacent to Hecla Mining’s producing Keno Hill silver mine, and hosts numerous occurrences of silver-lead-zinc-bearing quartz siderite veins as seen elsewhere in the district.

Silver North offers investors exposure to one of the most prolific silver districts in Canada and the world — Keno Hill — which is seeing major investment from Hecla Mining, the largest silver producer in the United States, following Hecla’s 2022 takeover of Alexco Resources.

Silver North’s underexplored Haldane project demonstrates high-grade, high-width potential akin to the veins being mined at Keno Hill.

“Our success rate in drilling new targets has been pretty good,” Weber commented with understatement. “We drilled Bighorn, where drilling had never been attempted and with the very first hole we hit silver veins, then at West Fault we made a new discovery a few years later, and now here at Main Fault, so I think it just speaks to the prospectivity of the Haldane property.”

TSX.V:SNAG
Share price: $0.11
Shares issued: 47,713,494
Silver North website

Richard (Rick) Mills
aheadoftheherd.com

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