Gold-Silver Ratio Expected to Reach 75 in Near Term: Strategic Investing Implications

Gold-Silver Ratio in Uptrend, Suggesting Short-Term Strength for Gold

The gold-silver ratio, a key gauge used by commodity market investors, has been in an uptrend over the last two months. This is due to a steeper fall in silver prices compared to gold prices, with US spot gold prices up just 1.8% YTD and US spot silver prices down 8% amid a crude oil spike and the crisis in the Middle East.

The gold-silver ratio is calculated by dividing the price of an ounce of gold by an ounce of silver. Currently, with gold priced at $4424 and silver at $70.01, the ratio stands at 63.18. Historically, once the ratio reaches a range of 40-50, precious metals take a breather until the ratio reaches 80 again, with silver falling by nearly 60% from the peak while gold incurring losses of 30% from the last peak.

Experts suggest that the current setup indicates that the gold-silver ratio is expected to trend higher in the short-term, boding well for gold prices. This is because when the ratio rises, it signals outperformance of gold vis-à-vis silver. In the near term, analysts recommend accumulating gold, with some expecting the ratio to drift toward 70-75 if the Hormuz disruption persists and global manufacturing PMIs weaken further.

Read also: Gold and Silver Prices Decline Amid Strengthening Dollar and Inflation Concerns

Key Recommendations:

• Accumulate gold in the near term
• Hold on to existing gold investments and start active accumulation for gold investments once the gold-silver ratio moves into the late 70s
• Consider entry points at $4000 for gold and $50 for silver

Market Outlook:

• Short-term pressure on gold prices is expected to continue until the gold-silver ratio reaches 75
• For silver, the gold-silver ratio needs to reach around 100 for the onset of the next breakout move
• The current ratio levels suggest that silver is no longer a screaming bargain, but it is not expensive either

Read also: Gold and Silver Prices in India: A Review of Current Rates Across Major Cities