Gold and silver prices - how do they compare?
Since the last blogpost gold and silver prices have moved in opposite directions. The gold price has been reduced from about 1820 USD/oz to 1795 USD/oz reaching as low as 1776 USD/oz in between. Bear in mind that even if we now describe such a price as 1776 as “low” it is still among the highest prices observed in 10 years. The price of silver has been on a slow incline since the last blogging – making its way from 27,5 USD/oz to around 28 USD/oz as this blog is being written. A silver price above 28 USD/oz is also a high price historically speaking, with there only being one period in recorded history where the price has been higher – December 2010 until April 2013 (as illustrated in the graph below).
The expression “gold/silver ratio” is an expression describing the relative strength of gold in relation to silver prices – how many ounces of silver does it take to buy one ounce of gold? This ratio gives the investor a very simple way to gather up some thoughts of whether gold is more expensive relative to silver or the other way around. When the ratio is going up silver is becoming cheaper compared to gold, and when it falls it is the other way around.
For some investors, the gold/silver ratio is a target of possible gains. Since the last blogpost two weeks ago, the ratio has been on a decline continuing the falling trend we have been observing over the last year. Maybe some gold bugs can achieve returns on predicting the further trend?
Is there a good explanation for why the gold price is falling relative to the silver price? And what do the futures prices suggest about the gold/silver ratio 6-12 months from now?
SvarSlettSince the writing of the blogpost, the ratio has risen slightly from 65 to 66. Gold prices have been falling since the summer, which is kind of strange bearing in mind the 1,9 trillion stimilus package presented by US president biden which was expected to boost prices. A weak dollar combined with covid-19 uncertainty was also expected to boost goldprices - which it did not.
SvarSlettIn the last 30 days silver has fallen 3,19% whilst gold has fallen 5,62% which has reduced the ratio by a bit for the period. One possible explonation for the gold price falling relative to silver is that silver often lags gold in the price runs, and maybe silver is starting to catch up.
Looking at future prices at LME - the gold 6 month is 1726,6 whilst the 12 month i 1729,2. Silver 6 month is 26,11 whilst 12 month is 26,12. If the future prices hit the mark, the ratio will be:
6 month: 66,13
12 month: 66,2