Gold and silver markets are surging higher with prices hitting fresh nine-year and six-year highs, respectively, and one market analyst sees room for silver to surpass gold through the rest of the year.
In an interview with Carley Garner, founder of the commodity brokerage firm DeCarley Trading, she said that she continues to pay attention to the gold-silver ratio, which has fallen to its lowest level in March. The ratio is currently trading around 83 points, down significantly from the March high above 124 points.
Investors use the ratio as an important measure of value between gold and silver. At its current level it takes 83 ounces of silver to equal the value of one ounce of gold.
Looking at the ratio, Garner said that she suspects it has room to fall as low as 70 points in the second half of the year.
“Silver starting to outpace gold, I think this is maybe just the beginning,” she said. “Gold and silver are momentum plays. Once the train starts pulling out of the station it's hard to stop it.”
As to how high gold and silver can go, Garner said that the yellow metal probably has room to move another $100 to $150 higher before the end of the year. At the same time silver prices could push as high as $30 an ounce, she said.
In the current environment of extremely bullish sentiment, Garner also warned that investors need to use caution at current levels. Although gold and silver have room to move higher, she said that these rallies don’t historically end well.
“We've seen this happen in gold, over and over and over. It eventually ends ugly, but that probably isn't going to happen right away,” she said. “I think we've got a little room to move on the upside before we start having to think about that.”
Although gold’s all-time highs above $1,900 an ounce is becoming a real target for investors and analysts, Garner said that she doesn’t expect silver’s all-time high around $50 is realistic. She added that economic uncertainty will continue to weigh on silver’s industrial demand, which makes up about 60% of the market.
The two factors Garner said that she expects will continue to drive gold and silver prices higher are a weaker U.S. dollar and lower bond yields.
“There's plenty of room for the dollar to move lower, especially given what, what our federal government's doing and what the central banks are doing,” she said.