Monday, March 21, 2016
GOLD:SILVER Ratio and Gold and Silver Weekly Charts Silver Likely to Outperform Gold Going Forward
The gold:silver ratio is up to multi-year highs so it is likely that the period of outperformance of gold over silver is coming to an end. When the ratio is high (silver circles) that begins a period where silver will likely outperform gold for a few years forward. If the ratio is at the lows (gold circle) then gold will outperform silver like 2011 to present.
In 2008, the gold:silver ratio topped out so astute traders weighted their positions in PM's more on the silver side rather than gold. They were rewarded when both gold and silver rallied but silver's move was near parabolic. In 2011, the ratio reaches a low, so professional commodity traders slowly began exiting silver positions rotating into a heavier weighing on the gold side. Both gold and silver sell off since 2011, however, note the underperformance of silver versus gold over the last few years. Gold held up better. If the PM's would have rallied over the last few years instead of selling off, gold would have rallied more than silver. Now the ratio is at the highs again. What do you think will happen?
One way to use the information is to begin weighing your precious metals plays more towards silver than gold going forward for the months and year or three ahead. It can be as simple as holding say 2 or 3 silver positions in miners or the metal itself versus holding 1 gold position. The chart above says as the next few years play out, this weighting will likely produce a better profit for you rather than holding all three as gold-related positions. Of course, you can simply choose to play silver outright without playing gold for the next few years to take advantage of what the gold:silver ratio predicts. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.