Will Silver Outperform Gold? In Defense of Silver

While both silver and gold are precious metals, and are often impacted by the same influences, the two metals have taken different paths in terms of their perceived value in the market.

In the first instalment of this two-part series, we examined silver’s role in the markets over the last 30 years compared to gold’s. This was done by dissecting silver’s history, the gold/silver ratio and why gold has almost always outperformed the white metal to date.

In part two, we learn why many insiders believe that silver is now prime to outperform the yellow metal and what it could mean for the white metal’s future.

Why silver may become the favored precious metal

As chatter about silver outperforming gold began to rise, David Morgan of the Morgan Report decided to do some outreach to see just how many insiders believe this could happen.

“I decided to take a survey … [I asked] in early 2018 ‘will silver outperform gold this year?’ Results — approximately 75 percent thought silver would outperform gold in 2018,” Morgan told the Investing News Network (INN).

Why do these people, as well as many others, believe that silver is on course to top its sister metal?

For starters, based on historical data, silver outperforms gold when growth and inflation rise in the US; however, when growth and inflation fall in the US, gold outperforms silver. At the moment inflation is beginning to rise, and if history repeats itself that means the price of silver should start to rise with it.

“With yields now back to levels that have been observed in the past, and inflation beginning to rise, a period of stronger growth and rising inflation could be at our doorstep. If this is the case, the price of silver is likely to outperform the price of gold,” states Treasure Coast Bullion Group.

The firm adds, “prior to 2008, the price of silver would generally begin to rise as inflation picked up and yields increased. Following the financial crisis, prices surged and then came off as both growth and inflation moderated.”

Since 2008, there has not been much inflation to speak of, and so this force has not been able to push the price of silver upward. Now that we have entered a period of time when inflation is on the table again, insiders believe that puts silver outperforming gold on the table again as well.

Adding to the notion of silver and inflation, Adrian Day of Adrian Day Asset Management told INN, “[t]raditionally, as you know, silver tends to outperform gold, particularly over short periods in a bull market. It can spike much easier than can gold. This is especially so if the precious metals rally is caused by inflation, rather than, say, geopolitical events.”

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