Global X Silver Miners ETF
In the long-run, I am essentially bullish Gold and Silver related plays across the board, but if you were looking for an entry point for a Silver trade, then here it is.
Below, is the Gold/Silver ratio. This ratio tells you how many ounces of Silver it takes to buy one ounce of gold. When the ratio is high, it means that Silver is cheap relative to Gold.
Historically, when this ratio comes down, it marks bull markets for the precious metals. I view Silver as a leveraged investment to Gold, so if it is getting more attention than Gold, then that means that people really think that Gold will go up, and are willing to speculate on its more volatile partner.
From the chart below, one may infer from my viewpoint that the precious metals play is historically hated as people have apparently no interest in Silver relative to Gold. From a value standpoint, Silver is at least historically cheap relative to Gold.
If we zoom in on this ratio, then we see that it has been bouncing off ~20 year overhead resistance the past few weeks, but it appears to have reversed. This suggests Silver may begin to outperform Gold, and this reversal is further confirmation that the bull market in precious metals may be upon us.
If we view Silver alone, then the move becomes more visible. I have provided 2 different charts of Silver with differing timeframes for you to view the current move.
A run to $16 appears imminent, and a breakthrough of $16 would be very encouraging to further confirm that the precious metals move is on.
January 11, 2016 to July 4, 2016 – Silver moved from ~$14 to ~$20 (~+42%)
January 11, 2016 to July 4, 2016 – SIL moved from ~16 to ~47 (~+194%)
I believe this is a nice time to build a position in SIL due to the recent breakout in Silver. SIL is a basket of silver mining companies. Miners tend to move multiples of their respected commodity due to rapidly increasing margins.
I would exit the position of SIL if Silver falls below $15.20. For long term investors, this position should play out in due time, and short-term fluctuations will be irrelevant. Hopefully, the move is now though.