Saturday, December 3, 2011

Gold SIlver Ratio - Trading range

The Gold Silver Ratio has been in a trading range and will most likely continue until one of the metals makes a move either up or down with the other flat or moving in the opposite direction.

Here is a two year chart of the ratio with a 20 and 50 day moving average. I've placed Blue lines indicating the top, bottom and right in the middle for an estimated 50% level. 

One can make the argument that it is on an ascent and the ratio may be heading higher.  It's definetly on an upwards path of higher (from May 2011) , consolidation (Green boxes), higher, consolidation, ???   It's above the 50dma and also above the 50% retracement of the last significant move.

If Gold should move to the upside, it will pull Silver along with it.  If they appreciate at the same rate, we'll have a flat ratio.  It's a matter of time before Silver starts another rally to the upside and appreciate at a faster rate than Gold, maybe next year, maybe 2013?  Until then, expect Silver to lag / follow Gold's path whichever it may be.

Many expect the ratio to be under 20/1 at the final parabolic phase of the bull market.  That is why many people invest in this particular precious metal.  The downside is that it is much more volitile than Gold   With Gold currently trading at $1747 and ounce, a 20/1 ratio would put Silver at $87.35 an ounce. (Corrected Dec 21st from 78.40, error noticed by a reader) 

One can argue that you will be more than doubling your capital within the coming years by investing in Silver when it reaches a 20/1 ratio.  Not a bad return considering that a saving account is less than 1%.


  1. A 20:1 gold/silver ratio with gold @ $1,747 would put silver @ 1/20th the value of gold. 1747 divided by 20 does not equal $78.40 per ounce but rather $87.35.

  2. Natser, yes you are right. Guess I was 1/2 asleep when I wrote that post. Thanks for pointing that out. When you switch 2 numbers around, it makes a huge difference! 78 - 87...