In the past four years, silver has rallied more than gold, with the gold to silver ratio continuing to be a good indicator of why gold’s poorer cousin is more appealing at the moment.
Silver is up over 150% since COVID chaos hit in March 2020, when it was fetching around US$12.47 ($18.95) an ounce. By comparison, gold has risen 58% from US$1,524 an ounce over the same time.
The gold to silver ratio denotes how many silver ounces are needed to buy one ounce of gold.
In an interview with Mining.com.au in April, Gavin Wendt, veteran resources analyst and founding director of MineLife, said precious metals traders use it to hedge their bets in both metals.
“When the ratio is higher and investors believe it will drop along with the price of gold compared to silver, they may decide to buy silver and take a short position in the same amount of gold,” he says.
“The ‘typical’ range of gold to silver is between 50 and 70, so if the ratio is sitting comfortably outside of this range, then it could be the right time to buy silver.”
According to the United States Gold Bureau — a private distributor of gold, silver, platinum and palladium coins from the US Mint — currently the gold to silver ratio is 77.
This means it takes 77 ounces of silver to buy one ounce of gold.
“Looking back 50 years, we can see that the [gold to silver] ratio continues to favour the purchase of silver over gold,” the US Gold Bureau says.
The bureau says the ratio has historically been in a range from a low of 14.01 (in 1975), to a high of 125.89 (March 17, 2020).
“If you bought silver when the [gold to silver] ratio was 14.01, you’d have been better off to have purchased gold — which has outperformed silver since then,” it says.
silver’s dual purpose as both a precious and industrial metal is what will drive demand, particularly its role in solar cell production.
Mining.com.au will delve deeper into what’s been going on in the silver market in the upcoming ‘Silver Quarterly Report’.
Write to Angela East at Mining.com.au
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