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Silver – Has Winter Finally Broken?

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The gold-silver ratio is the valuation of the two precious metals in relation to each other, and can provide an indication of the maturity of a bull or bear cycle in these markets. Market tops for gold and silver are typically accompanied by low gold-silver ratios [silver outpacing gold to the upside], and market bottoms are typically accompanied by high gold-silver ratios [silver outpacing to the downside].

To put it more simply, the ratio is high when silver is low and as silver goes higher, the ratio drops.

 

So what is the gold-silver ratio saying now?

 

The chart below shows the gold/silver ratio going back the last 10 years using weekly data. The black line shows the silver price. The ratio [red line] is currently second highest in 10 years.

Purple lines show trend line support for the ratio, which when broken indicated a new move upward in silver prices.

 

Perhaps just as useful is to use the same data but plotted as the silver to gold ratio. When done this way, as you’ll see on the graph below, the ratio and silver price correlate extremely well.

Purple lines indicate trend resistance.

Green arrows indicate low silver price regions within longer term uptrend.

What does this mean?

  • The charts suggest the ratios [gold/silver & silver/gold] and silver prices are near multi year lows.
  • The trend line resistance on the charts, as drawn, look like they are about to be broken soon or in the very near term, indicating a new upward trend in silver.
  • Silver prices have been crushed since 2011, despite rising demand and increasing supply problems. The price is deeply oversold and more than ready to rally.
  • Like all Precious Metals, Silver has been vilified, painted with negative pessimism by the majority of media and the financial world, which puts it an excellent place to begin a multi-year rally.

Silver has  been crushed since 2011, despite increasing demand. It’s deeply oversold and more than ready to rally. It’s been vilified, painted negatively by the majority of media and the financial world, which puts it an excellent place to begin a multi-year rally.

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