bogfit wrote: "Perhaps you've got a rearview mirror that works better than mine."
- Angry Gopher “Investors who begin to trade or follow the gold and silver markets aren't likely to go long without reading or hearing about the gold-silver ratio. The gold-silver ratio is an expression of the price relationship between gold and silver.
According to fund manager Shayne McGuire, the gold-silver ratio is the oldest continuously tracked exchange rate in history. The primary reason the ratio is followed is because gold and silver prices have such a well-established correlation. Since 1968, the prices of gold and silver have moved in opposite directions only one time, for seven consecutive days.”
https://www.investopedia.com/articles/investing/080316/historical-guide-goldsilver-ratio.asp The gold-silver ratio has been one of the most reliable technical ‘buy’ indictors for silver, whenever the ratio climbs above 80. The gold-to-silver ratio has now spiked above 85, which is the highest level of this entire 18-year bull market! In fact, you have to go back 27 years to 1991 for the ratio to be higher than it is today. Amazingly, the ratio is currently higher than it was at the depths of the 2008-09 financial crisis
The gold-to-silver ratio is a powerful trading signal that can help to identify buying or selling opportunities in the precious metals sector. The ratio represents the number of silver ounces it takes to buy a single ounce of gold. It might sound simple, but this ratio is more powerful than it may seem at first blush.
Historic ratios for comparison
The ratio of silver to gold in the earth’s crust is 17.5:1. In Roman times, the price ratio was set at 12 to 1. In 1792, the gold/silver price ratio was fixed by law in the United States at 15:1, which meant that one troy ounce of gold was worth 15 troy ounces of silver; a ratio of 15.5:1 was enacted in France in 1803. The average gold/silver price ratio during the 20th century, however, was 47:1.
Over the past 20 years, the ratio has averaged right around 60:1. Thus, the current ratio of 85 is very high historically and nearly 60% above the 20-year average. The ratio is signaling that silver is extremely undervalued relative to gold at this point in time.
The all-time high for the gold-to-silver ratio occurred in February of 1991, at the height of an economic Recession. The Recession of the early 1990s lasted from July 1990 to March 1991 and was driven by a restrictive monetary policy and Iraq’s invasion of Kuwait in the summer of 1990. The latter drove up the world price of oil, decreased consumer confidence, and exacerbated the downturn that was already underway.
In the past, the gold-to-silver ratio spiked higher during times of economic instability or Recession (see grey shaded areas). This makes sense as gold is generally viewed more strongly as a safe-haven asset than silver and institutional investors move funds primarily to gold (or dollars) for safety. Furthermore, nearly 50% of silver’s demand is industrial, so economic contraction would impact the price more severely.
The silver price falling more rapidly than the gold price or climbing more slowly than the gold price increases the ratio. Put simply, it takes an increasing number of silver ounces to buy a single ounce of gold during these periods.
Yet, the current gold-to-silver spike is happening absent a major crisis, as economic growth picks up and major stock indices hit new all-time highs the current gold-to-silver (September 10, 2018) spike is happening absent a major crisis, as economic growth picks up and major stock indices hit new all-time highs.
https://www.mining.com/web/alert-gold-silver-ratio-spikes-highest-level-27-years/
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