U.S. investment guru Jeffrey Gundlach made clear in his latest webcast that looking towards silver could be a very good idea for investors.
Gundlach’s call to purchase silver actually goes against the feelings that many investors have held for years but is based upon the fact that the gold has been given a bullish view as of late. In recent months, gold ETFs have experienced some of their largest outflows in years, and some noted hedge-fund operators, such as George Soros, have cut their positions in the yellow metal. By going on the other side of this trade, Mr. Gundlach is sticking his neck out in a high-profile way.
Of the two metals, he favours silver because it has a high beta, which means that it does not move proportionately to other metals in a bull or bear market. It is for this reason that silver is often described as gold on steroids, so if he’s right, his investment will yield far greater returns than an equal dollar amount of gold and far great losses if prices slide. The reason he’s bullish on gold is money printing by central banks. Over time, he expects the metal to rise in tandem with the expansion of central-bank balance sheets.
Over the past 18 months, the relationship between central-bank currency debasement and gold has broken down, with the yellow metal trading sideways as bank balance sheets expand. For Mr. Gundlach, the sideways trend is temporary, allowing value to build up in the precious metals space.
“Silver was very much in favour two years ago. Now it’s very out of favour,” pointing to the previous highs near $50 (U.S.) an ounce compared to the present level around $29. He said current prices for precious metals represent a reasonably good entry point for investors who don’t have positions.