Gold vs Silver during Precious-Metals Bull Markets

Below is an excerpt from a commentary originally posted at http://www.speculative-investor.com on 25th September 2014.
It is widely believed that silver outperforms gold during bull markets for these metals, but that’s only partially true. It’s true that silver tends to achieve a greater percentage gain than gold from bull-market start to bull-market end. It’s also the case that silver tends to do better during the final year of a cyclical bull market and during the late stages of the intermediate-term rallies that happen within cyclical bull markets. However, the early stages of gold-silver bull markets tend to be characterised by relative strength in gold. This is a point we’ve made in the past, including in TSI commentaries earlier this year, but warrants revisiting due to the recent price action.
The point we are trying to make is established by the following long-term chart of the gold/silver ratio. The boxes labeled A, B and C on this chart indicate the first two years of the cyclical precious-metals bull markets of 1971-1974, 1976-1980 and 2001-2011, respectively. Clearly, gold handily outperformed silver during the first two years of each of the last three cyclical precious-metals bull markets that occurred within secular bull markets. Therefore, while silver’s recent weakness relative to gold certainly doesn’t guarantee that a new cyclical bull market began last December, it is not inconsistent with our view that a new bull market began at that time.

This post was published at GoldSeek on 29 September 2014.