Gold becomes money this time
This gold move is different. Gold does not rise and then fall back. It becomes money.
Gold's own history explains why this cycle still has room. Gold was legalized in 1975 - the government gave permission to own it. It began trading at $200, which was a peak, then dropped to $103, call it $100. From the 1976 low to 1980, it made an eight-fold move to $850. Then it bottomed around $260 in 2001-2002 and rose to $1,920 by 2011 - another eight-fold move. Two eight-fold bull markets.
This cycle started from a low in 2015 and has produced only about a four-fold move so far - half of gold's relative gain, and done twice before under far easier conditions for the world. Hard conditions for the world are good for gold.
Silver is deeply cheap against gold
Measure silver against gold by dividing an ounce of silver into an ounce of gold and stating it as a percent. This is the gold-silver ratio flipped upside down.
Silver peaked at $50 twice, in 1980 and 2011. But its value against gold was very different at each peak. In 1980 silver was 6.5% of the gold price. In 2011 it was 3.1%. Now it sits around 1.5% to 1.6%. Silver could double, even rise five-fold, just to return to where it stood against gold in 1980.
Silver has already broken above a 10-year-wide range against gold, though still at very low levels. The spread lived in a 13-year range capped near 8.5%, still well below levels seen in the 1980s, 1990s, 2000, and 2008. If price took out its 50-year highs, relative value can too. Silver reaching 10% of the gold price, blowing past the 1980 high, should not shock anyone, because its value against gold is historically off the chart.
A rational silver target is $300 to $500.
Mining stocks are the real key
Gold and silver miners are the strongest signal right now. Silver miners are the favored pick over gold miners, though both should do well. Most investors carry a negative view of miners and call them dogs. Measured against gold, miners have outperformed over the last several years, and almost no one acknowledges it.
Miners are priced far below the value of what they pull out of the ground - almost laughable. On the XAU index versus gold, spread history goes back to the 1980s. XAU divided into an ounce of gold averaged 25%, ran up to 35%, and dropped to 18%, but stayed inside that range. In 2015 it collapsed to 4%. Now it sits above 8%. Just returning to the middle of the old range means a large gain.
GDX only started in 2006, so XAU gets more weight for its longer history. GDX holds about 20% silver miners and trades at 2.07% of gold. It made three runups to the 2.2% area, hitting 2.2% again in February. A sharp drop followed as the metals fell, then miners pulled back and recovered to 2.07%. The chart forms a rectangle with three highs - a textbook base that a technician would buy on a breakout.
The conservative floor of the multi-decade XAU range was 18%, hit repeatedly. Breaking that floor collapsed it to 4%. Old support now becomes resistance. Between the current level and 18% there is nothing but thin air on the chart - reaching it is more than a double and a quarter from here.
The spread breakout is the trigger
When the spread favoring miners breaks out and surges, it always converts into net price gains for both the metals and the miners. Even during the 13-year range, when miners beat gold, the net price of the metals rose with it. Miners drag the metals up. It never happens in a calm or falling market - always in an up market.
The market is pushing toward that breakout now. A monthly close above the decade-old relative ceiling would be the key timing signal - more telling than any silver headline. Seen as a plain price chart, dividing price into price, this is the biggest textbook base ever. Once the spread breaks, charts, price, and momentum stop mattering - the metals complex goes ape.
Timing and the debt catalyst
The breakout structures are so massive that once resistance breaks and miners return toward their true value against gold, the move happens fast. Within a couple of quarters the spread could explode and the net price of the whole mining complex could rise sharply. The move may keep running for a couple of years, but the repricing itself is quick.
Miners are probably the most profitable sector in the US stock market, yet everyone watches semiconductor earnings instead. The bigger catalyst is not simply higher metal prices but miners repricing toward historical norms as debt fears grow.
Once the spread breakout hits, expect new stories to surface from the sidelines: debt problems, financial market stress, and more focus on the collapsing US government bond market. Paired with a government debt crisis, this marks a new fundamental reality that could change many things. Investors who wait for certainty may find that certainty only arrives after the repricing is already done.
