Investor complacency is at an all-time high. Yet the stock market continues to wallow near all-time highs, refusing to give into the simple reality that the Bull Party is nearing the end. Unlike most collapses, this one’s had a long calm before the storm. But the coming storm is inevitable and due to the long brewing cycle, will be more than a little precipitous. It seems doubtful that tomorrow’s report following the conclusion of the May FOMC meeting will generate any new considerations, but that’s not to say there isn’t plenty going on. Nevertheless, the Volatility Index (VIX) has already dropped to a new low this week, a level not seen in more than ten years.
This apparent “low-risk” environment has deflated precious metals prices, which may be the best and possibly last opportunity to capitalize on stock market value near its all-time high and gold prices, for example, more than a third below its all-time high. Even SPDR’s GLD ETF saw fit to purchase more than twenty one tonnes of gold in April. The fund has been dramatically under covered for months, why the sudden need to catch up? Even China’s gold imports were up 65% in the 1st quarter. The “big boys” are looking at this economic environment and are getting nervous, now may be the time for “little guys” to get while the getting is good, because once the bubble bursts, getting out of the market at a peak and into precious metals at a recent low will be nothing more than the blurred memory of a distant and hopefully not missed opportunity.
Another profitable consideration is silver. For cost efficiencies; gold, silver and copper are frequently mined together. However, there is sixteen times more silver on the Earth than gold. So it follows that gold’s value should be in the range of sixteen times greater than that of gold. However, the last time gold:silver prices were close to “normal” was in 1980, when silver hit its all-time high of almost $50 per ounce and gold hit $850 per ounce. At that point, the price ratio of gold to silver was 17:1. Since that time, the difference has been growing more and more out of whack. The ratio currently stands at an astounding, yet absurd, 74:1. Gold is more than a third below its high and has every bottom-side right to be there, but silver is more than 66% below its previous high and is being artificially suppressed.
Global and domestic, political and economic uncertainties are putting increasing pressure on the stock market. When such pressure finally breaks the back of this bull market, the collapse will most probably be sudden and dramatic. Now is the time to capture stock market profit and invest more than ever before in the potential appreciation, safety, and security of physical precious metals. As usual, diversification within metals and products is recommended. But now more than ever, the potential growth of silver is shining even more brightly. Increasing manufacturing demand and reduced mining output are just two more reasons to catch this silver bullet train before it leaves the station. Don’t get caught without a chair when the music stops!