Very few people are talking about it, but it appears there is a speculative mania brewing in gold, silver, and platinum. Like crypto in 2017 and 2020-2021, prices of precious metals are poised to surprise to the upside. A perfect storm of fundamental factors and technical signals make this a high conviction trade.
Gold is the leader and strongest of the precious metals and has been in a bull market for 3 years. As is the case for most speculative bull markets, lower quality assets join the party after the leaders have been established and that is what we have seen this year with silver and platinum. Both have broken out of multi year trading ranges; silver up 55%, platinum up 71%, while gold is “only” up 43% YTD.
While these returns are impressive, if a bubble is on the horizon these returns will be dwarfed. And there is good reason to believe one is coming. Geopolitical uncertainty, lofty stock market valuations, and growing national debts across the developed world are provide a fundamental narrative to support higher prices. Layer on falling interest rates, persistent central bank demand, and potential dollar weakness, and the case for a precious metals mania strengthens further.
On the technical side, silver is completing a 45 year cup and handle pattern with a price projection of $250-$500/ounce. Silver is currently at $45.56. Furthermore, the gold/silver ratio is at 83, near the top of a multi decade range, meaning silver is historically cheap relative to gold. In comparison, at the top of the 2011 silver bull market the ratio was 30. This means, in a speculative frenzy, silver has room to appreciate 2.8x relative to gold.
The same is true for platinum. At the top of the 1980 bull market platinum prices reached $1,000 per ounce, or $3,950 in today’s dollars. It currently trades at $1,583. Historically, platinum has traded close to or even higher than gold, which gives it a natural target of parity with gold. In other words, platinum has room to appreciate 2.4x relative to gold.
Like crypto in 2017 and 2020-2021, investors saw Bitcoin’s rise and then jumped into the high beta altcoins. The same thing is happening in precious metals today. With both the fundamentals and the technicals aligned, and interest in crypto waning, I believe it is now precious metals’ turn for a speculative cycle.
