This is the kind of scenario that would spark a significant bull run in both gold and silver. But its ability to postpone that day of reckoning will rapidly come to an end.” And that’s when inflation will cause an even greater crisis in terms of the US dollar crisis and a sovereign debt crisis, a fate that, so far, the US has managed to avoid.
He will give up that fight in order to save the economy and the markets from the consequences of that financial crisis. Powell will surrender and inflation will win because when push comes to shove, and when we are in a financial crisis, Powell will not continue to fight inflation. Peter Schiff says the Fed can’t put off inflation’s day of reckoning much longer. Despite the Fed’s tough talk, it seems likely the central bank will be forced to pivot back to loose monetary policy to rescue the sagging economy in the near future.
But the Fed is engaged in a fight the numbers say it can’t win. The Fed is currently tightening its monetary policy in order to fight inflation. With that spread widening again, we could be setting up for another big rally in silver. Meanwhile, the silver-gold ratio fell from over 100:1 to just over 64:1, close to the high end of the historical norm. As gold pushed above $2,000 an ounce, a 39% gain, silver rallied to nearly $30 an ounce, a 147% increase. Silver typically outperforms gold during a gold bull run. But as the Fed slashed rates and launched its massive quantitative easing program, gold rallied and took silver with it. Most recently, in the summer of 2019, the sliver-gold ratio climbed to nearly 93:1 and at the onset of the pandemic, it rocketed to over 100:1. As this chart shows, the snapback is swift and strong. Since January 2000, this has happened four times. Historically, when the spread gets this wide, silver doesn’t just outperform gold, it goes on a massive run in a short period of time. The ratio fell to 30-1 in 2011 and below 20-1 in 1979. And when it does, it does it with a vengeance. Historically, the ratio has always returned to that mean. To put that into perspective, the average in the modern era has been between 40:1 and 50:1. That means it takes over 92 ounces of silver to buy an ounce of gold. One factor signaling silver is significantly undervalued is a silver-gold ratio of over 92-1. The spot price of silver hasn’t been this low in over two years. But given silver’s fundamentals, the current economic dynamics, and the trajectory of the Fed, silver still appears very oversold. The Silver-Gold Ratio Is Telling Us Something!
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