How to Construct a Precious Metals Portfolio
The precious metals are on the verge of flashing a signal that has only appeared three other times in the last twenty years. While the signal will be positive for all of the precious metals, it is silver that looks set to shine the brightest over the next several months.
Investors should carefully consider whether they have a proper allocation to the silver sector at this time.
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Silver has been the laggard of the precious metals sector as of late: while gold has just broken above its 2016 high of $1,378 on the heels of trade war tensions and the possibility that the Federal Reserve may lower interest rates this year, silver has barely budged.
Year-to-date, silver is down 3.5% to $15.00 per troy ounce as of the end of the week. Meanwhile, gold is higher by 9.3% or $119 for the year, to $1,400.
What are we to make of this continued underperformance by silver? Is it a sign that the move in gold is suspect and should not be trusted? Or is it a sign that we are simply in the early stages of a new bull market?
Let us examine the present period in silver prices, the modern history of the gold to silver ratio, and what this might mean for silver investors going forward.
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The Federal Reserve is on the verge of a credibility problem: the market does not believe the central bank at its word.
Let us rewind: at the January 30, 2019 Fed meeting, the central bank wavered on its 2015 – 2018 interest rate hike campaign and began to hint that it would at least pause for the intermediate-term on further increases. This was a significant departure from the 2015 – 2018 period, which saw rates rise from zero to the present 2.25% – 2.50% in three years.
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