Gold:Silver Ratio Weekly Chart

This chart helps answer the question as to whether it is better to own gold or silver. When the gold price is outperforming the silver price, the ratio climbs higher.  When silver outperforms gold, the ratio moves lower.  The gold arrows show the periods where gold outperformed silver, the gray arrows show where silver outperforms gold. Gold outperformed silver after the Dotcom Bubble popped in 2000, then as the bombs dropped to start the Iraq War in March 2003, look at how silver outperformed gold for the following four years into 2007. As the Financial Bubble popped and markets moved towards the 2008 Market Crash, gold was outperforming silver. Trader's had the vibe that trouble was afloat and started to run towards gold to provide some safety.

At the March 2009 market bottom that occurred due to the Fed's QE1, silver started to outperform gold again and the uber strong performance of silver is notable from 2009 into early 2011. Silver shot up to 50 bucks in price before collapsing.  Do you notice a pattern in the chart above?  When the ratio moves up above 80-ish and higher, that shows the outperfomance of gold is ending and a flip to silver outperformance is beginning.  Conversely, when the ratio moves down under 50-ish and lower, this shows that silver has gotten too big for its britches and that gold will start to outperform its gray sister. After the Fed announced Operation Twist and then the ECB started pumping with LTRO 1 and 2 in Fall 2011, note the outperfomance of gold over silver beginning once again. The ratio is now in the neutral area continuing to favor gold over silver moving forward.

The ratio is at 65 now and the long gold arrow should continue higher with gold outperforming silver but perhaps later this year the ratio may venture above 75-ish to indicate time to start rotating the gold positions into silver positions.  The metals and miners have been beaten badly in recent months as well as gold and silver. The anticipation is that on a more intermediate term basis (ignoring very short swings since silver is prone to move multiple percentage points on any given day), gold should outperform silver until perhaps later this year.

Another very interesting observation is recorded if you study the chart closely. Correlating the gold:silver ratio to the broader equity markets, note how the stock market tops occur as the ratio move down to the 50-ish, where you want to move from silver to gold, and stock market bottoms typically occur at the 80-ish level, where you want to rotate your gold positions into silver.  The stock market topped in 2000 for the dotcom bubble and a long-term bottom occurred for the stock market in March 2003. Similarly, the stock market topped in October 2007 and bottomed in March 2009. The chart says the stock market is at or has made a top and is now working towards a bottom that will not occur until the ratio above moves toward 80-ish and higher which can easily correlate to 100, 200 or more negative SPX handles. 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.