WSJ article on Silver:Gold Ratio (3/25/18)
I definitely give credit to the editors over at the Wall Street Journal for coming up with this title: "Sliding Silver Sends Scary Signal". Say that ten times fast.
Quick background on the silver-gold ratio. It represents the amount of ounces of silver needed to exchange for one ounce of gold (based on spot prices for each respective metal).
"Gold is priced 82 times higher than silver, the highest such discrepancy in two years and seen as a negative economic indicator." A high ratio is described as forecasting sluggish growth because silver, unlike gold, is viewed by many as an industrial metal. It is used in a variety of products from solar panels to electronics & batteries to medical supplies. When the world economy slows then it is an easy forecast that the demand for commodities used in producing many goods will also decrease. It is interesting to notice that the ratio has been quite high for several years now. Perhaps talk of the US government imposing tariffs on our trading partners has people looking at the high ratio and suddenly finding something to justify it.
“The concerns about growth are hindering the silver buyers right now,” said George Gero, a managing director at RBC Capital Markets . “Silver is not thought of as bullion or as a store of value. It’s still thought of as an industrial component.” This is an interesting statement. Goods serve as a store of value because they are recognized as valuable. But this perception of value does not spring forth fully-formed from the head of Zeus, rather it is cultivated over time as a result of utility. Gold is prized as jewelry and has some unique metallurgic characteristics. Silver certainly has more industrial characteristics than gold. But does that mean it is correct to view it exclusively as an industrial metal? What do you think?
My favorite part of the article came in the last paragraph - “It [the relationship between gold and silver] has little to do with market sentiment,” said Nathan Thooft, senior managing director of global asset allocation at Manulife Asset Management . “I would be in the reversion camp of this being a buying opportunity for silver.” It is nice to see the Journal able to reserve two sentences in this piece for the contrarian investor perspective.
What do you all think about silver being at historic levels in comparison to gold?
Full article - https://www.wsj.com/articles/sliding-silver-sends-scary-signal-1521986400
All the JPM shorts are in the final stages of being covered, while the very same bank — after having a perfect track record in this endeavour — has been steadily buying the phyzz ounces, and is now the single largest hoarder of bullion (yes, bullion) in the world.
I dunno’ booboo bear wadda’ you think?
~ Yogi the bear (only you can prevent fiat fires!)
Good point. Watch what a man says, not what a man does.
Thaz it!
I am ready to trade all my bullion silver for bullion gold when the ratio gold/silver is below 55. I don't know if it will happen in a near future. :=(
That is another interesting way to look at the gold:silver ratio. It is fair to say that many people who pay attention to this ratio in the first place are interested in stacking ounces not the government currency it can be exchanged for. I see many people expressing the same view you do @ronaldovelino. It's hard to say whether the ratio will go up or down in the short term though. I'll emphasize the last paragraph of the article though - a reversion to the mean is usually a very strong force in markets so you may be on the right side of this one.
Here's something to think about, if you switched gold to silver and silver to gold, using the 80-50 rule, you would have the following over 33 years.
One ounce of gold in 1985 would net you 350 ounces of silver valued at $5845 at 16.70 silver.
I'd say, stack while you can still get your hands on any physical silver.........Go get ya some
Thank you for sharing that visual. It certainly appears to be an interesting pattern. Almost seems like a phenomenon that would have come up in the investigation by some intelligent Wall Street Journal editors...
Thanks @john-robert for your comment, but I doubt that there is one intelligent editor that would dare to post an article about precious metal investing. LOL
So so so cool post. Good for you @john-robert