Editor’s Note: My wife and I spent last week visiting friends in South Carolina. While we were there, the price of gold hit a new all-time high above $3,400 an ounce.

That prompted us to stop by a jewelry store on our way home. My wife inherited several pieces from her mother that contain gold and silver, so she was curious to see what she could sell them for.

Although we were offered a fair price for the gold, the store owner commented that there is relatively little demand for silver. “They’re practically giving it way,” she said, “so I’m not buying any.”

For the remainder of our drive home, my wife calculated how much money she might realize if she sold her gold jewelry. Meanwhile, the contrarian in me wondered if this might be a good time to start loading up on silver.

The New Gold Standard

Gold has been on a tear lately. After closing near $2,951 an ounce on April 7, its price shot above $3,400 two weeks later.

Actually, gold has been cruising up the charts a lot longer than that. Eighteen months ago, it was trading under $1,800 an ounce.

But once the Fed started reducing its policy rate, the price of gold took off. Central bankers around the world started stockpiling gold to hedge their exposure to currency fluctuations versus the U.S. dollar.

Gold’s rapid rise has also attracted the attention of speculators, including private equity. They view it less as a hedge against the dollar and more as a store of value while the stock market is getting hammered.

Hi Yo Silver!

That move has paid off handsomely, but it begs the question: How much higher can the price of gold rise? Sooner or later, some of the central banks that own gold may decide to unload some of it to realize their paper profits.

At the same time, private equity investors may decide that it’s time to stake out positions in a less expensive metal. And when they do, silver is the obvious place for them to start looking.

Eleven months ago, silver was priced around $32 an ounce. At the start of this week, it was still trading below $33.

Bull(ion) Market

You don’t need to own silver to participate in its performance. The iShares Silver Trust (NYSE: SLV) is an exchange-traded fund that is designed to mimic “the day-to-day movement of the price of silver bullion.”

At the end of last week, this fund held more than 453 million ounces of gold in trust. That makes it one of the largest silver owners in the world.

Any investor can indirectly participate in silver’s future price performance by owning shares of this fund. And if the Trump administration insists on prosecuting its trade war with China much longer, the price of silver could start heading up.

On April 7, the same day that the price of gold bottomed out, Silver also stopped falling. Even after rallying since then, it was still trading below where it began this month as shown in the chart below.

Commercial Break

The conventional investment thesis for silver relies on its many commercial uses. Those uses include automobile manufacturing (silver coated contacts for electronics), solar energy (photovoltaic cells), and a wide variety of electronics (conductivity).

The trade war with China will most likely inhibit demand for silver since many of the commercial uses cited above apply to most products subject to reciprocal tariffs. However, the metal itself may become a surrogate for gold because of those same tariffs.

That’s why now may be a good time to consider adding some silver to your portfolio. It may not be long until the price of gold levels off, at which time silver might become the new game in town.