I hope you took my advice.
In early March, I wrote that if you were looking to buy precious metals, silver was your best bet.
It had sold off too much relative to gold. And the gold-to-silver ratio – how many ounces of silver it takes to buy one ounce of gold – had eclipsed 80.
[ad#Google Adsense 336×280-IA]As I explained, the ratio had only risen that high a few other times in the past 20 years.
Since then, the ratio has followed my script.
Today, it’s down to 73.
While gold prices have risen about 4%, silver prices have popped even higher.
The metal is up more than 17%, from less than $15 per ounce to near $17.50.
And history suggests silver will continue to outperform its more expensive cousin…
Since 1990, the average gold-to-silver ratio is 66. With gold trading around $1,290 an ounce, that would put silver at around $19.55 an ounce… an 11% gain. But if the past repeats itself, the news could be even better for silver.
As you can see, the gold-to-silver ratio fell to almost 32 back in 2011…
A return to its 2011 levels would push silver to $40 per ounce (if gold doesn’t move at all).
Of course, we may not see a move this large, but it has happened before.
Right now, history suggests silver is a better investment than gold. But another way to benefit from a more normal gold-to-silver ratio is to buy silver producers. These companies are leveraged to silver prices… so they benefit even more than the physical metals when prices rise.
Let’s look at silver producer First Majestic (AG) for an example. In the fourth quarter of 2015, it cost First Majestic $11 to produce an ounce of silver. When silver increased from $15 to $17.50 per ounce like it did since my March 4 essay, the company’s profits per ounce produced increased from $4 an ounce to $6.50 an ounce. That’s a 63% increase in profits, versus just a 17% increase in the silver price.
If silver prices increase even more, watch out…
You can see how impressive some of the best silver stocks have performed since my essay:
These companies make more silver than any other precious metal. (In the case of royalty company Silver Wheaton, it receives more silver from its partner producers than any other precious metal.)
That means the shares of these companies will continue to benefit if the price of silver continues to outperform gold. Consider buying shares today.
Good investing,
Brian Weepie
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Source: Growth Stock Wire