What Does The Silver Bull Market Mean For Gold?

If you’ve been paying attention this past week, then you know that silver has entered something of a bull market. Silver has increased almost 25% this year and investors are starting to get wise - they realize that the ratio of gold to silver is very high right now and that silver represents an underrated investment when it comes to precious metals.

Getting lost in the shuffle of all this silver talk? That other precious metal, gold. Although gold has enjoyed a nice 2016 thus far, many investors in commodities have seen gold take something of a backseat to the attention to silver. But if you’re bullish on gold, what does the recent silver move mean for you, and is gold really still a good investment after all?

Recent Moves In The Gold Market

According to CNBC, gold lost about a third of its value between 2013 and 2015. Although historical prices are no guarantee of future price shifts, it had to find a bottom eventually. With gold ETFs performing well and the price of gold hovering at stronger levels, it’s apparent that gold is in a relatively healthy place, and may be going up, depending on how your economic outlook shapes your investment vision.

Make no mistake: how you view the economic outlook should influence how you see gold. Even the gold bears acknowledge that. Eddy Elfenbein of the Crossing Wall Street Blog told CNBC, “I think the Fed has made it clear that its bias is towards tightening. I don't know if they will, but that's clearly their bias. So that's why I would stay away from gold right now.”

If even gold bears believe that Fed policy will influence the price of gold, then it’s important to realize that if you have a different outlook on Fed policy from Mr. Elfenebein, maybe you also have a different outlook on the short-term future of gold.

Can Both Gold And Silver Increase?

Although gold is something of an inverse of the dollar in many times in its history (the correlation is not that predictable, however), its relationship with silver can be even more complicated. Silver is a precious metal like gold, and people who describe themselves as “gold bugs” will also tend to have favorable opinions of silver. This keeps silver and gold demand fairly stable relative to each other.

Can both gold and silver increase? The answer is a definite yes. But that’s no guarantee that they both will increase. As always, the laws of supply and demand win out. Even in a bull market for silver, it’s important to try to keep your opinion of gold separate from the white metal. Although they’re both commodities, they both have very different prices—and these prices are going to remain different for as long we continue mining them.

Remember that your outlook on the economy can affect your view of gold. Todd Gordon told CNBC, “The way I see it, gold should rally in either of these two situations: One, the Fed is on hold for the rest of 2016 and stocks break to a new high, which should keep the U.S. dollar under pressure, pushing gold higher. Or, if the stock market does fail, gold should act as a safe haven, giving it a bid.”

The lesson? Try not to view silver and gold as a zero-sum game in and of themselves.