Can Gold Break $1300 Before Silver Breaks $18

It’s been a battle between the bulls and bears since the beginning of the year. After the FOMC rate increase in December gold bulls seemed to have given up the battle but they never forfeit the war. Gold soared to trade above 1298 but investors were unable to secure the $1300 price before prices eased to 1295.20. Silvers climb was miraculous adding almost 300 points on Friday to trade at 17.85 after hitting a high of 17.98 as traders continue to push the $18 level. Platinum moved to 1080.00 at the top of its trading range.  Silver futures rallied Friday, tallying a gain of roughly 15% for the month, as gold futures settled at their highest level since late January of last year. The dollar-denominated metals got a solid boost from a weaker dollar.

Gold Eagle News reported that Gold is up nearly 21% from its December 2015 lows. Moreover, silver has added an impressive 28% to its price during the same time frame. Most notably, the HUI gold and silver mining index is up over 100% during this period.

Despite the strong performance we have seen from the precious metals complex thus far in only the first few months of 2016, many fear that the move is already nearing an end.  Readers should be aware that the potential for both gold, silver, and strong mining equities is much greater than the moves seen thus far. Indeed, a review of the metals and several valuation metrics over a longer time frame can provide us with clues as to what we should expect through the later part of this decade.

Gold bottomed in 2001 after a nearly 20-year bear market following the peak in 1980 at $850/oz. The return advance to again challenge the $850 level took eight years, although it was not until the following year (2009) that prices decisively broke through this level for good.

Turning to the gold to silver ratio, just in the last week as silver broke higher through our important resistance level near $16.25, we note an important trend change in the ratio between the two precious metals. Since the precious metals peak in 2011, as both gold and silver fell, it should be observed that silver had fallen further than gold on a percentage basis. Whereas in April of 2011 it took roughly 30 ounces of silver to buy one ounce of gold, in January of 2016 it took an incredible 84 ounces of silver to buy that same one ounce. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, fell to a six-month low on Friday of 71.8, down from 81.3 at the start of the month.

Seeking Alpha said that Nothing can stop gold’s ascent, according to many market commentators, and we wholeheartedly agree. The U.S. dollar doesn’t look likely to strengthen a great deal now until at least the September FOMC meeting, which may allow gold to start to make a move on an all-time high. Buying gold or a quality gold fund right now is a great move in our view, and we expect even after recent gains to see sizable returns over the next few months. An all-time high may seem a little far-fetched and, let’s be honest, it has a long way to go before it will get there.