Some of the world’s best hedge funds and trading desks on Wall Street employ a simple strategy, one that is focused on the concept of relative valuation between two assets. In today’s market, the basic materials sector has shown a potential price widening between two widely followed precious metals. Gold has once again outpaced silver by a wide margin, and the last time the two got this far away, investors walked away with a handsome profit.
Considering the price action in these precious metals compared to the price action in other asset classes like bonds and even cryptocurrencies like Bitcoin can give investors a better understanding of what is happening underneath the hood of the United States stock market. Of course, more reasoning needs to be considered before investors take on this relative valuation trade.
