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Gold/Silver Ratio Back at Extremes

Commodities / Gold and Silver 2018 Sep 26, 2018 - 05:11 PM GMT

By: MoneyMetals

Commodities

The gold/silver ratio, calculated by simply dividing the gold price by the silver price, may be signaling the end of the bear market in metals is drawing near. That could be good news for gold investors and great news for those who hold silver.

First, let's take a look at a long-term chart of the ratio:


The 1980 low in the ratio coincided with the blow off top in the silver price at $50/oz. Both metals fell sharply after that peak, and silver underperformed gold for the majority of the next 11 years.

The gold/silver ratio peaked in 1991 when it spiked to almost 100. Gold was priced near $400/oz and silver near $4. Since that peak, the ratio has spent the majority of its time bouncing between about 40 on the low end and 70 on the upper end of the range.

Today it takes about 84 ounces of silver to buy a single ounce of gold. That looks like an opportunity. If the past 40 years are a guide, now would be a good time for metals investors to favor silver.

There have been 7 instances where the gold/silver ratio exceeded 80. Six of them represented a top with the ratio falling sharply (silver outperforming) very soon afterwards.

We think history is likely to repeat here and that silver will outperform gold in the years ahead.

We strongly suggest favoring silver any time the ratio hits 80 or more. And we believe investors should continue overweighting silver until the ratio gets to 50 or below.

It could ultimately go much lower. In fact, we won't be surprised if the gold/silver ratio gets back to the 1980 low below 20 before the next bull cycle in metals is over.

By Clint Siegner

MoneyMetals.com

Clint Siegner is a Director at Money Metals Exchange, perhaps the nation's fastest-growing dealer of low-premium precious metals coins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

© 2018 Clint Siegner - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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