Friday , 22 September 2023

Silver Investors Take Note: Gold/Silver Ratio Needs To Decline Below 77:1 – Here’s Why

… This analysis presents a major signal that does not leave any guess-work as to the timing of the expected re-awakening for silver’s historical monetary status.

This version of the original article, by CHRISTOPHER AARON, has been edited* here by for length (…) and clarity ([ ]) to provide a fast & easy read.  For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE bi-weekly Market Intelligence Report newsletter (see sample here)

The gold-to-silver ratio, or the number of ounces of silver required to purchase one ounce of gold, is within a window of approximately 6 to 9 months whereby it will either strongly confirm or strongly deny the arrival of a new bull market for both metals… is being given away – check it out!

Closing this week just below 83.9, the gold to silver ratio remains stubbornly elevated in favor of gold, thus indicating that investors, in sum, see little “precious” value in silver, instead, having relegated it mostly to the realm of an industrial commodity over the last two years…

Gold-to-Silver Ratio Pattern

A significant concern is that the gold-to-silver ratio is now making its second attempt to break higher within the last two months from a multi-decade resistance zone between 80 – 84 (red circle, chart below). We can see how critical this resistance zone has been for the sector since 2002 as, each time the ratio entered the 80 – 84 zone in the past, silver buyers showed up “en masse” to bid silver higher over the subsequent years.

Further, the resultant multi-year declines in the ratio in favor of silver represented the strongest price gains for not only silver but also for gold. Generally, when silver is outperforming gold, both metals tend to be in rising cycles. However, when gold outperforms silver, this typically corresponds with declining cycles.

The ratio continues to follow a linear trend higher (above, blue lines) which began in July 2016 and now comes in at 77.0. This trend now meets with the multi-decade resistance zone (black), and so one of these levels must necessarily break shortly.

For the sector to remain bullish, the ratio must back down immediately from the present level, or else it will trigger a multi-decade inverse head & shoulders pattern (blue callouts), which would target a level of 138 ounces of silver required to purchase one ounce of gold by 2023. (This target for this pattern is calculated as equal to the amplitude of the head (84 peak – 30 bottom = 54) added onto the breakout point (84 + 54 = 138.)

View the gold-to-silver ratio chart above. The right shoulder portion of the pattern is indeed higher (i.e. slanted) in comparison to the left shoulder. This is perfectly acceptable within technical analysis. Also, it indeed portends to an even more powerful resolution than if the shoulders were evenly proportioned.

Takeaway on the Gold-to-Silver Ratio

The gold-to-silver ratio could still resolve positively (lower) from its multi-decade resistance zone within the next 6 to 9 months. To do so, silver must either out-perform gold as both metals move higher in 2019 or fall less on a percentage basis during whatever final decline in price may remain. However, the time window for silver to prove itself is narrowing.

Bottom line is that silver investors – and all precious metals investors in sum – should want to see this ratio move lower immediately and decline through 77.0 within the next 6 to 9 months..

(*The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)

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