…Many traders use the Gold/Silver Ratio as a measure of price comparison between these two metals and, right now, Silver is extremely undervalued compared to Gold.
This post is an edited ([ ]) and abridged (…) excerpt from an article by Chris Vermeulen, for the sake of clarity and brevity to provide you with a fast and easy read. Please note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
Understanding The Gold/Silver Ratio
The Gold/Silver ratio is simply the price of Gold divided by the price of Silver [and] this creates a ratio of the price action (like a spread) that allows us to measure if Gold is holding its value better than Silver or not. If the ratio falls, then the price of Silver is advancing faster than the price of Gold. If the ratio rises, then the price of Gold is advancing faster than the price of Silver.
Right now, the Gold/Silver ratio is above 0.80 – well above a historically normal level, which is usually closer to 0.64. I believe the current ratio level suggests both Gold and Silver are poised for a fairly big upward price trend in 2022 and beyond. This may become an exaggerated upward price trend if the global market deleveraging and revaluation events rattle the markets in early 2022. [In fact,] I expect to see:
- the Gold/Silver ratio fall to levels below 0.75 before July/August 2022 as both Gold and Silver begin to move 15% to 25% higher in Q1 2022 as events shake investor confidence…
- After that initial move is complete, further fallout related to the deleveraging throughout the globe, post-COVID, may prompt an even bigger move in metals later on in 2022 and into 2023…[Indeed,] I expect a 50% to 60% rally in Silver, targeting the $33.50 to $36.00 price level initially…
I believe the lack of focus on precious metals over the past 12+ months may have created a very unusual and efficient dislocation in the price for Silver compared to Gold. This setup may present very real opportunities for Silver to rally much faster than Gold over the next 24+ months – possibly longer. If my research is correct, the Junior Silver Miners ETF (SILJ), presents a very good opportunity for profits.
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