All that glitters isn’t gold.

Silver also has quite a shine lately.

While gold has gotten the headlines, silver has had a solid bull run over the last several months. In fact, the white metal has outperformed gold in this gold bull market.

Last week, silver charted an 11 percent gain, cracking $30 an ounce for the first time in over a decade.

And since its low in February, Silver is up over 41 percent. Meanwhile, gold is up about 22 percent in the same period.

This might seem unusual, but it's not. Silver typically outperforms gold in a gold bull market.

For instance, gold charted a gain of around 40 percent during the pandemic. Meanwhile, silver was up a whopping 141 percent!

This is because despite most focus being on its industrial demand, silver is fundamentally a monetary metal, and its price generally tracks with gold over time.

Peter Krauth, author of The Great Silver Bull pointed out during a recent interview that silver was money even before gold.

“Because silver relative to gold has a lower value by weight, it is easier to use in daily transactions. I've heard before, a few times, that it's estimated that throughout history, there has been more business transacted through silver than gold, because gold is a way that you store wealth rather than use it to transact. Obviously, it makes for great money, and it makes for ideal money when you're doing larger transactions because you need to transport less and move less around to make large payments. … Today, a silver maple or a silver eagle, let's say, roughly worth about $30, $35 or so, is a few hours of labor. You could technically go out and buy groceries with that, pay for some meals, pay for some gasoline. It really is a daily, natural form of money compared to gold. You'd need to have fractions of an ounce of gold to pay for things. All of these reasons, I think, explain why it makes, and has made a perfect kind of money.”

Since silver and gold are both money, it makes sense that their prices would generally track together over time.

Silver is still underpriced

Despite the recent gains, silver is still underpriced compared to gold.

The gold-silver ratio is a tool that investors use to track the price of silver and gold relative to each other. Today, that ratio still stands at 76:1. That means it takes about 76 ounces of silver to buy one ounce of gold. Or you can look at it the other way and say one ounce of gold will buy 76 ounces of silver.

To put the current gold-silver ratio into historical context, in the modern era, it has averaged between 40-1 and 60-1. Over the last 20 years, it has averaged 68-1.

In other words, even with the recent rally in the silver price, the gold-silver ratio is still above the 20-year average and far above the average in the modern era. This indicates the price of silver still needs to increase by a sizeable amount to close the gap.

We have also seen that when the gold-silver ratio gets far above the high end of that historical average, it tends to snap back to the mean with a vengeance.

For instance, in 2020, the gold-silver ratio set a record of 123-1 as COVID hysteria gripped the world and then plunged to around 60-1 as central banks around the world cranked up the money creation machine to cope with governments shutting down economies.

In another example of this big correction, the gold-silver ratio fell to 30-1 in 2011 after rising to over 80-1 during the money creation of the Great Recession in the wake of the 2008 financial crisis.

From a historical perspective, when you see gold-silver ratios well above their historical average, it tells you that silver is underpriced compared to gold. That indicates there is a strong possibility that silver will go on a bull run to close that gap. Historically, this has often happened in the midst of a gold bull rally.

The recent silver rally has been impressive and there is reason to believe it still has legs. If you’re bullish on gold, you should probably be even more bullish on silver.

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