At these sorts of price levels, combined with China’s determination to both diversify its foreign reserves and also to try and promote the yuan as a rival world currency to the U.S. dollar, China will very much likely maintain its program of gold buying for a considerable period of time.
The world might be rediscovering gold as a safe haven in 2016, but China has never lost focus on the yellow metal and its unique wealth-preserving and diversifying properties. In fact, most informed observers think China’s true gold holdings are much larger than their officially reported reserves. But until that theory is supported by concrete facts, gold investors now should be comforted by the fact that Beijing remains a steady buyer of bullion, likely for the long haul.
So, gold is enjoying a great start to 2016, but investors shouldn’t forget about that other major precious metal: silver.
Nicknamed “the devil’s metal,” silver is often viewed as a beta play on gold, in that once the latter metal starts moving higher, the former can produce even greater returns on a proportional level.
Price rose 14% last time around: After fluctuating between 69 to 79 over the course of 2015, the gold-silver ratio now stands at 78:1. That is, it takes 78 ounces of silver to buy one ounce of gold. In the past two decades, the ratio has only been above that level on about five occasions, and never for more than a three months.
And the ratio hasn’t been this high since August, when it stood near 80:1. What happened then? Silver rallied 14% in the following two months. Gold added about 5% in the period.
