Market News

How the Gold/Silver Ratio Impacts Investors


The market has seen an exciting resurgence in the prices of gold over the past year (since fall 2018). In fact, according to news outlets, gold spiked to over $1,400/ounce in June 2019 and continues to rise. There are numerous predictions about gold’s potential over the next few years. While historically silver has made similar spikes, it seems to be the decade for gold. Silver is lingering at just over $15/ounce. This ratio of gold to silver at mid-year 2019 means, “an ounce of gold has a value at 92 ounces of silver.”

There is much speculation as to how the gold/silver ratio will fall out this year. Initially, the fixed price ratio was 15 to 1, and in the 1990s, the ratio was an average of 47 to 1. Investors find a new pattern for the gold/silver ratio is not easy to accomplish.


Gold/Silver Ratio, Short-Term Vs. Long-Term

For investors that follow the gold/silver ratio, most expect a near-term correction since a previous vastly disparate ratio was 89 to 1 in 2008. There is some enthusiasm in the possibility of an upcoming modest spike in silver prices, given the state of gold. If silver continues to peak, buying low would be optimum at this moment. T For the long term and for the more cautious investors that recognize the slowed production in silver along with the reduced industrial demand both nationally and abroad, a silver comeback may be no more than wishful. Silver at one time was indeed renowned as a desirable precious metal to supplement an investment portfolio and fulfill metal requirements in many industries.

Silver is shown to be the most valuable and beneficial during periods of inflation and especially during periods of heightened global manufacturing activities (such as WWI and WWII). However, as the Great Depression impacted the nation, gold took precedence with a ratio of 100 to 1.

Another View of the Gold/Silver Ratio

Give the current state of the economy and an ever-booming stock market under the latest administration, and there are many enthusiasm and confidence among investors. While a recession is a certain possibility, the market remains strong. This is encouraging for gold prices and for silver prices. An economic downturn would naturally impact silver demand, but there is another way to look at this. Even if a recession occurred, it is after that period when the economy is shown to recover and industrial metals, especially silver, are in higher demand. In any event, a gold and silver investment may provide diversification for investment portfolios, whether the gold/ silver ratio is any indication for the future.

The Gold/Silver Ratio, Historically

When you compare gold and silver prices over the last century, it’s evident that gold trends above silver. Silver’s highest price came in at $48.70/ounce in 1979 and came very close to that again in 2011. Analysts agree that a fall in gold prices due to geopolitical issues at that time caused the surge in silver. When you evaluate today’s geopolitical landscape, and the vulnerability of the United States, the likelihood of serious events is at an all-time high. According to Fox contributor, Doug MacKinnon, a blackout is imminent. In his article entitled Will you survive the coming blackout? he states, “It truly is not a question of “if,” but of “when.”

Any episode of this nature would be devastating and certainly impact the gold/silver ratio much like the events that took place in 1979 (the Russian invasion of Afghanistan along with the hostage crisis in Iran, for example). Given trends in gold and silver, this decade is an attractive one for many to make a serious investment in precious metals, even silver.

The Gold/Silver Ratio Model

It is true that the gold/silver ratio has historically been a helpful model to measure cyclicality of gold and silver prices. The disparity between the metals has generally been based on surrounding events that impact supply and demand. While it is difficult to predict as to how the gold/silver ratio will fall out based on our geopolitical storms, there is certainly no better time to make an alternative safe-haven investment in precious metals. Even though gold is the most valuable, silver is today reasonable and accessible. Either metal is an investor’s choice for a strong diversification plan in the case of an unwanted disaster. Tangible, precious metals are shown to be assets that withstand economic downturns. What could be better a gold or silver IRA during this time of worldwide uncertainty?

Market News

The Secure Act and How It Will Impact Your IRAs

Your IRA benefits are possibly soon to change because of The Secure Act. If you are planning for retirement, the chances are you have invested in an individual retirement account (IRA). Tax-free and tax-deferred IRAs have been offered since 1974 to help Americans increase their assets without incurring penalties. Not only that, these IRAs are transferrable to particular surviving beneficiaries you choose. Today, you and your families enjoy tax-deferred benefits in traditional IRAs. The fact is, The Secure Act vote, also called “Setting Every Community Up for Retirement Enhancement Act” (which already passed in the House 417 to 3) is going to change this to a degree.

The Secure Act Impact

While there are some benefits to The Secure Act, the downside is that the act includes language that would eliminate “stretch IRAs” – those that give you flexibility in extending tax-deferred benefits, particularly to surviving non-spouse beneficiaries. If an IRA-holding individual passes away today, a child could be cared for with this benefit. Once Congress passes this legislation, your stretch IRA will not be eligible to transfer as a tax-free account. Overall, IRA holders could see a reduction in their retirement plans, particularly IRAs, Roth IRAs, and 401(k) plans. As well, a beneficiary would have only ten years to withdraw the IRA funds, and they will be subject to increased taxes. Consider that nearly one-third of inherited IRA funds will go to taxes.

Also included in The Secure Act is a new age requirement for minimum IRA distributions, from 70-1/2 to 72. This could change the eligibility of a surviving spouse but also include a higher tax burden due to a single taxpayer status. The current government tax cuts, in place through 2025, once expired and coupled with The Secure Act legislation could result in retirees and their beneficiaries experiencing a significant deficit. Consider how these actions might also impact your son or daughter’s college plans or your son’s trust fund in a highly taxed outcome. As well, the 529 college savings plans for homeschooling would be significantly impacted.

Why The Secure Act?

While the current retirement savings plan system in the American workplace has been effective over the years for retirement financing and investments that fuel our nation’s economies, it is not perfect for all citizens. The Secure Act is in place to address some of the current retirement system shortcomings: nearly half of the American workers do not have retirement plans, and the system has outdated savings limitations, timelines, and strategies for converting lifetime savings. Naturally, The Secure Act supports the government in that politicians can make more in tax revenues and yet not raise taxes.

Respond to The Secure Act Now

The Secure Act, or Setting Every Community Up For Retirement Enhancement Act of 2019, features a variety of positive, government-enforced benefits, but the negative impact on certain IRA holders is concerning. The bottom line is that 1) this act would minimize the tax-deferred advantages for some IRA beneficiaries, and 2) this act would require that non-spouse beneficiaries claim inheritances within 10 years. Instead of gradually taking funds under the required minimum distribution (RMD) plan, this demand accelerates the distribution—impacting tax advantages. The Secure Act would primarily impact heirs and inheritance accounts.

This is a case when a gold-backed IRA or silver IRA is an absolute win. You can respond to The Secure Act now, before it is signed into law. It is merely a time when gold and silver held in storage are sound, tangible, and yours to do with as you wish. If you are ready to take matters into your own hands, reach out to Reagan Gold Group for an honest, up-front investment in a gold or silver IRA. Gold investing or silver investing is an excellent response in a time of uncertainty for our political landscape — what better time than the present to firm up your retirement portfolio with a gold IRA.