Why Is Silver Really Lagging Behind Gold? | Seeking Alpha
It appears that all the short-term targets in the gold market have been met. The gold/silver ratio has given an unusual signal that the price of. This interactive chart tracks the current and historical ratio of gold prices to silver prices. Historical data goes back to What is the relationship between silver and gold? have very different qualities which have separate and distinct influences on their prices.
Why Is Silver Really Lagging Behind Gold?
While silver is considered to be a precious metal, a currency of last resort and an unerodable store of value like gold, there are some important differences, with the key being that gold remains the most marketable asset for large transactions. That, coupled with it being the ultimate store of value of which there is a finite supply, means that it is a staple investment for central banks and governments.
You see, central banks buy gold to reduce risk, support and stablize their fiat currencies and enhance the stability of their financial systems while hedging against a weaker dollar as well as inflation.
That ensures that there is a steady demand for gold which increases during times of financial distress. This becomes apparent when reviewing central bank gold purchases over the course of the second quarter During that period, central banks bought One of the biggest buyers was the Russian central bank which is battling to stabilize the Russian ruble and an economy suffering from deep structural issues as well as the impact of the prolonged slump in crude.
The importance of gold to central banks is underscored by the fact that it is the third largest reserve currency globally after the U. In stark contrast, silver has no equivalent role, and for this reason, its price is more volatile than gold and subject to greater fluctuations triggered by what could be perceived to be rather innocuous events such as manipulation or the rise of alternate assets that draw investors away from silver.
Silver to 'Outperform Gold' in 2018 as Gold/Silver Ratio Trades 41% Above 50-Year Average
Why is silver more volatile than gold? Another characteristic which contributes to silver's significant volatility is that, unlike gold, it possesses considerable utility. Silver is widely used in a range of industrial processes because of its conductive properties.
For that reason, industrial demand can have a considerable influence upon its price, and as can be seen from the table, industrial demand has tapered off significantly in recent years. What is even more startling is that silver is closely correlated to other commodities with economic inputs, meaning that they only rise in value during times of economic growth.
If we take a look at the relationship between silver and crude, it becomes apparent that there is a positive correlation as the chart illustrates. That is further emphasized by the relationship between silver and copper which is set out in the chart below. Both oil and copper are widely recognized as key gauges as to the health and performance of the global economy.
Then, throughout the fifties and sixties, silver began to appreciate relative to gold, and bythe silver-to-gold ratio was Shortly thereafter, the price of silver went on a roller-coaster ride as the Hunt Brothers cornered the marketand in the aftermath of that episode, the ratio swung wildly in the other direction, reaching The average silver-to-gold ratio over the entirety of the twentieth century was Today gold is even more valuable, relative to silver, with the ratio currently standing at Even a return to the Or, going further, is it possible the silver-to-gold ratio could ever approach Israel Friedman certainly thinks so.
Friedman and others like him argue that the silver-to-gold ratio today should be at historic lows — not just Non-Monetary Ratio Measurements There is other evidence to support a bullish silver hypothesis.
The silver-to-gold ratio, in terms of the volume of ounces traded in the commodity markets, is approximately 7: According to the U. The silver market is a really interesting product to trade. It has multiple personalities, since it can be used for industrial, scientific and technological purposes, as well as having a long history of serving as a currency or monetary unit.
November All Over Again? When we see the fundamentals in the silver market, there is an increase in the use of silver in solar panels, especially in newer panels.
Gold Silver Ratio: The Historical Relationship and What it Means
As we move into a crypto-currencies environment, the general consensus has totally forgotten silver, which has the qualities of a currency. Crypto-currencies are in the early stages of development in establishing themselves as assets. This does not mean that such new assets have eliminated all other assets which have proven themselves historically to provide not only the ability to produce positive returns but to serve as risk assets as we enter any economic or political crises.
Do not forget gold and silver. Economic Fundamentals The policies of the current Trump administration are not positive for the economy.