Silver Could Be On The Precipice Of A Big Move
Gold, silver and the commodities group in general could be among the big winners of 2020. Commodities are at historic low levels compared to the S&P 500 and look like a solid value play over the next decade.
Not only are commodities historically cheap, they also tend to predict major turnarounds in equity bubbles. Whether or not that means we're in for a decade of low returns remains to be seen, but it does indicate that the risk/return profile for alternative asset classes is much more attractive.
Same goes for precious metals. Gold tends to get most of the focus. Given the likelihood of rising inflation, rising U.S. interest rates and a weaker dollar, a run to the $1700-$1800 range for gold remains a strong possibility. That type of environment could also lead to huge gains for gold miner stocks.
The best value, however, could be in silver. You can see in the chart above that silver has jumped more than $1/ounce in less than three weeks, which has translated into 10% gains for silver miners.
Silver prices were in a two-year downtrend from 2017 to 2019, but melted up rapidly once they were able to break above that trendline. Much of the past few months has seen the price of silver retreating and giving back a good chunk of those gains. But silver has broken back above that short-term trendline and it's moving sharply up once again.
A price target of $20/ounce - a gain of 12% from here - looks more likely than not. Don't be surprised if silver miners post gains of 20% in the first half of 2020.
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