Precious metals have been a red-hot investment in 2020. Gold briefly broke $2,000 this month, while silver touched up near $30.
But it has been the rally in silver prices that has been eye-popping. And perhaps a big reason for the extra momentum we saw this summer in precious metals.
Typically, when silver outperforms gold, it adds “beta” and leads to good things for precious metals.
In today’s chart, we capture this with via the Silver (NYSE:SLV) to Gold (NYSE:GLD) ratio.
While the ratio has been in a downtrend for the past nine years – see (1) and (2) – the ratio has rallied sharply over the past four months. In fact, the ratio posted its largest 16-week rally in 13 years.
So what do we make of this?
First, it’s testing resistance, so it shouldn’t be surprising to see precious metals take a breather here. That said, if/when we see a breakout over the downtrend line, it will be very bullish. Stay tuned.