Silver Is Running, Oil Is Collapsing

Commodities all have certain properties in common, but their prices don’t all move in tandem. There’s a rotation happening in the commodities space, with major implications for investors of all stripes.

The WTI crude oil price recently sank below $70 per barrel, its lowest price of the year so far. This really shouldn’t be too shocking since President Trump promised to “drill, baby, drill” and thereby shore up America’s petroleum supply.

There are also geopolitical causes of the oil price rout. As Patrick De Haan of GasBuddy explains, “If sanctions on Russia are eased, that certainly could put downward pressure on oil,” and certainly the forward-looking market is anticipating this contingency by selling petroleum futures contracts.

Then, there are circumstances that Trump cannot control which are impacting the oil price. In particular, OPEC suggested that more crude oil supply is about to enter the market, including a planned production increase in April, which naturally will put downward pressure on the petroleum price.

Courtesy: Yahoo Finance

Will reduced oil prices help to bring inflation down during a time of global tariffs? It’s a possibility that all investors need to consider before assuming that the price of everything will automatically skyrocket in the coming months.

In any case, contrarian investors might want to look at oil stocks which are currently trading at a discount. A good example would be Occidental Petroleum (OXY) stock, which is heavily favored by Warren Buffett.

In contrast to oil, silver has caught a bid lately and has powerful upward momentum. Interestingly, silver lagged behind gold for a while and the gold-to-silver ratio hovered near 90; now, it looks like silver is ready to play catch-up to gold.

There’s no need to worry about whether it’s “too late” to get in on the silver rush that’s happening now. Silver is an industrial metal with many real-world use cases, and this should provide a tailwind over the long term for silver investors generally.

Courtesy: Yahoo Finance

Besides, silver still needs to hit its prior resistance target of $35 from late last year. Then, after breaking through the $35 level, it’s off to the races as silver traders should set their sights on the long-standing $50 resistance target.

Besides its industrial uses, another tailwind for silver is the declining U.S. dollar. Crescat Capital strategist Otavio Costa summed up the situation by stating, “Dollar lower, hard assets higher. We are at a key turning point in history and a global rebalancing is now unfolding, in my view.”

You’re probably not hearing much about silver in the mainstream press, but that should change soon. When silver slams through $35, $40, and $50 sooner or later, reporters will suddenly have plenty to say about the white metal.

To get in on the action before the next leg up in the silver price, it’s fine to own some physical silver while also holding shares of carefully selected silver mining stocks. Plus, there are silver royalty companies that you might choose to look into.

Finally, keep your eye on the gold price since it tends to move in the same direction as silver. Your due diligence should pay off as you’ll be more informed than the vast majority of investors out there.