Silver Dollar Giant
This Gold Silver Ratio Is An Essential Signal Of Ascending Silver Prices
The previous time the gold silver ratio stood below 40:1 was in February 1998, just right after silver had staged a 33% rally in five weeks, whilst gold had gained just 4% over the exact same period (which commenced at the start of the year). The contraction within the ratio over the period was from 48.4:1 to 38.1:1.
This time, some thirteen years on, the gold Silver Prices ratio is buying and selling at between 39:1 and 40:1 and a similar contraction has taken precisely the exact same length of time. This time nevertheless, gold and silver are trading at over $1,440 and $36, whilst back in 1998 they were at $300 and just over $7.
This time the Silver Prices have bounded up as a result of a continual belief (whether or not right or wrong) in gold’s upward trend on the back of prevailing geopolitical and inflationary concerns. Both gold and silver are already in sustained bull markets, whilst in 1998 the change in ratio marked the start of a shift in sentiment, even though one that was buffeted by subsequent external events.
Silver investment can frequently exceed that of gold for more than just one single reason: a) the history of silver’s higher volatility over gold, prompting professional activity having a view to gathering steam on returns; b) silver’s lower unit price, which draws in some smaller-scale traders who want exposure to precious metals due to inflationary worries in particular and who don’t necessarily have sufficient wealth to invest in gold to any meaningful level; c) within the United States particularly, silver has a long-standing investment tradition. This is due to the period when the US dollar was on the gold standard and private people were prevented from holding gold, so they used silver as a substitute.
At the start of 1998, gold was beginning to stage a recovery after a lengthy period of uncertainty, portrayed by intermittent announcements of large-scale central bank sales that unsettled market sentiment; this was augmented by increasingly heavy mine hedging as well as these two fundamental factors, combined with anti-inflationary fiscal policy, had kept gold prices under certain pressure.
What was different about the start of 1998 was the starting formation of the European Monetary Union, which gave the marketplaces a degree of comfort and reduced the expectation of official sector sales. (This, obviously, was latterly to be stymied by the announcement in May 1999 by HM Treasury in the UK of the planned disposal of up to 40% of UK gold holdings; emotion then changed considerably as a result of the institution of the very first Central Bank Gold Agreement in September 1999). Investors began to return to gold and silver was a natural beneficiary of the changes in sentiment.
Interestingly enough, silver fabrication demand in 1988 was just over 26,000 tonnes; in 2010 it was extremely close to the exact same level, suggesting that the market itself isn’t much deeper than it was within the late 1980s. Actually, on the basis of LBMA clearing figures, the December 2010 daily average clearing pace was just below 100 million ounces, much less than one-third of the clearing numbers for end-1997.
The framework of the demand side has transformed with industrial demand fluctuating, but photography, jewelry, and silverware falling considerably. Coin demand, by contrast, continues to be growing steadily.
Continual retail demand has helped the rise in the price of silver in recent months, highlighting the continued recognition at the retail level of the value of silver by comparison with gold. This has been especially marked within the Far East, where silver bullion bars have scarce as well as commanding high premiums, whilst India and also the Middle East have also been strong buyers.
As a result the ratio has to some extent taken on a life of its own and been bought and sold as an outright entity within the bullion markets. Now at 13-year lows it’s not in uncharted territory, but is certainly oversold.
While the markets remain bullish about the outlook for gold on the back of continual inflationary as well as geopolitical fears, silver is likely to continue to attract attention. The outright price might make silver unappealing for fresh bull positions, but technically driven and momentum trades might yet see prices higher if the political situation isn’t resolved having a minimum of further trauma. Silver has often been the commander between the two precious metals due to its lower unit price and higher volatility; the ratio can therefore be regarded as a similar leading indicator. Actually it’s probably one of the most substantial indicators in terms of precious metals market sentiment and, so, when it comes to searching for guidance, the chart should be watched closely for signs of change. Even stabilization could be significant; a bounce may well trigger stops. I recommend you buy silver dollar coins and put them away safely for the time coming soon when you may need them.
Silver Dollar City’s The Giant Swing
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GIANT HALF POUND GOLDEN EAGLE 8 oz Pure silver.999 layered 24k Gold $375.00 |
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GIANT HALF POUND GOLDEN EAGLE 8 oz Pure silver.999 layered 24k Gold $375.00 |
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