Silver usually outperforms gold when economic growth and/or inflation rise.

When this is the case, gold mining stocks usually rise too.

There are few exceptions, like the 1997-2003 period.

Maybe it has something to do with the purchase of almost 3500 tons of silver by Warren Buffet’s company Berkshire Hathaway starting in 1997.

First graph is the relation between Gold and Real Interest Rates

Then the Barron’s Gold Mining Index

The above index compared to Gold (ratio). Mines are very low !

The very followed Gold/silver ratio

And now the Barron’s Gold Index compared to the Gold / Silver index inverted

I’ve checked that relationship on a longer time period (Sept. 1971 to now).

Finally I can confirm that if Silver outperform Gold the mining stock are going upward except for the 1997-2003 period I did mention.

As already mentioned it is probably because of the Warren Buffet’s purchase of a huge quantity of silver (almost a quarter of mines’ production in 1997) that has distorted the relationship for a while.

Gold was mostly declining during the 1997-2001 period and silver went from $4 to $7 in 1997 thanks to the Buffet’s purchase.

Happy Investing

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