Chart of the week: silver is due to outshine gold

The gold/silver ratio tracks the relative progress of the two monetary metals by dividing the silver price into the gold price, revealing how many ounces of silver it takes to buy an ounce of gold. The ratio is now suggesting that silver has some catching up to do.

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When gold rallies and is set to keep performing strongly, silver often does even better: it is also a traditional store of value, and because the silver market is smaller than its gold counterpart, it is prone to sharp ups and downs.

The gold/silver ratio tracks the relative progress of the two monetary metals by dividing the silver price into the gold price, revealing how many ounces of silver it takes to buy an ounce of gold. The ratio is now suggesting that silver has some catching up to do. A few weeks ago it reached 88, the highest reading in nearly 30 years.

The last time it reached a similar level, in early 2016, it slid by nearly a quarter as silver outperformed gold, notes Matt Simpson on City Index. A similar drop now would imply a decline in the ratio to below 75.

Viewpoint

Tim Price, Price Value Partners

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