What does the Silver to Gold Ratio Tell Us

October 2022

The Silver to Gold ratio is rising, and it breaks past 95 and tests the 99 to 110 ranges. Silver could experience a rapid move. From April 2020 to Aug 2020, SLV rose by almost 100%.

Inflation

Inflation should peak shortly; the latest CPI reading will likely coincide with a peak. However, inflation will reappear when the dollar peaks in 2023. The current inflation falls more under the MANFLATION category (purposely natured and fostered by man). The next dose will be the real deal, as it will coincide with a dollar top.

Bonds

On the weekly charts, bonds are trading in the “insanely” oversold ranges. They are primed to move higher and are looking for any reason to mount an explosive rally. Barring a black swan event, this should come to pass. In this scenario, bonds will likely trade in the 144 to 149.40 range; the ideal target falls in the 145 to 147 range.

NIKKEI 225 Index

It is also projected to put in a lower high in September-October. However, if it tops out before any major index in the US (DOW, NAS, Russell), it should be construed as an early warning signal that a top in the US markets is imminent.

The Significance of a Rising Ratio for Investors

The silver-to-gold ratio is essential for investors interested in precious metals. The ratio compares the price of silver to that of gold, and it is often used as an indicator of market sentiment towards these two metals. Over 2021, the silver-to-gold ratio has increased, which has important implications for investors.

The silver-to-gold ratio measures the ounces of silver to buy one ounce of gold. For example, if the price of gold is $1,500 per ounce and the cost of silver is $15 per ounce, the silver-to-gold ratio would be 100. In other words, buying one ounce of gold would take 100 ounces of silver.

Over the 2021 year, the silver to gold ratio has been steadily increasing. At the start of 2020, the ratio was around 85, meaning it took 85 ounces of silver to buy one ounce of gold. By mid-March, the ratio had risen to 120 as the COVID-19 pandemic sent shockwaves through the global economy, and investors flocked to safe-haven assets like gold. Since then, the ratio has remained elevated and currently stands at around 75.

What does the rising Silver/Gold ratio mean for investors?

There are a few key takeaways. First, it suggests investors are becoming more optimistic about the global economy. As the ratio declines, investors are more willing to take on riskier assets like stocks and are less interested in safe-haven assets like gold. Conversely, investors become more cautious as the ratio rises and turn to safe-haven assets like silver.

Another key implication of the rising silver-to-gold ratio is that it may signal an opportunity for investors to add silver to their portfolios. Silver is relatively cheap compared to gold when the ratio is high, making it an attractive investment option. This is especially true for investors who believe the global economy is due for a downturn or recession, as silver tends to perform well during economic uncertainty.

The rising silver-to-gold ratio indicates investor sentiment towards precious metals. While it may signal caution on the part of investors, it also presents an opportunity for those looking to diversify their portfolios and add exposure to silver.

Understanding the Silver-Gold Ratio and Its Implications for Investors

The silver-gold ratio is the ratio of the price of silver to the price of gold. It is used to measure the relative value of silver compared to gold. The ratio can be calculated by dividing the current price of gold by the current price of silver.

Historically, the silver-gold ratio has been used by investors as an indicator of market sentiment and economic conditions. A high ratio, meaning that it takes more ounces of silver to buy an ounce of gold, is often seen as an indication of a weak economy. Silver is considered a more industrial metal, and its demand is more closely linked to economic activity. In contrast, a low ratio, meaning that it takes fewer ounces of silver to buy an ounce of gold, is often seen as an indication of a strong economy, as gold is seen as a safe-haven asset during times of uncertainty and economic instability.

However, it’s important to note that the silver-gold ratio is just one of many factors that investors consider when making investment decisions. The ratio alone should not be the sole indicator of when to buy or sell either metal. Other factors, such as global economic conditions, supply and demand, inflation expectations, and geopolitical risks, can also impact the prices of both metals.