munKNEE.com Your Key to Making Money
zones in both gold and silver. [Here’s why and what the current major high of 80:1 means for the future price of silver.]The original article, as written by Gary Christenson (DeviantInvestor.com) is presented below in an edited ([ ]) and abridged (…) format by the editorial team at munKNEE.com (Your Key to Making Money!)
to provide you with a fast and easy read.
- At BOTTOMS in both gold and silver, based on 40 years of history, silver prices have fallen farther and faster than gold. Hence the gold/silver ratio reaches a relative high.
- At tops in both gold and silver the ratio is often low since silver rises more rapidly than gold. As Jim Sinclair says, “silver is gold on steroids.”
Examine the following graph of the gold to silver ratio (monthly data) for the past 40 years. I have circled the six most extreme highs in the ratio with green ovals.
At 5 of 6 extremes in the ratio silver was at or near a long term bottom. The one minor exception was when silver bottomed in November of 2001 at $4.01 and the ratio peaked later in May 2003. Otherwise the ratio was quite accurate at indicating major silver lows.
For more confirmation, assume a silver buy signal occurs when an extreme in the gold to silver ratio has been reached, and the weekly silver price closes above its 5 week moving average.
Monthly Ratio Extremes Silver (weekly) closes above
(green ovals above) 5 week MA
June 1982 July 2, 1982
August 1986 September 5, 1986
February 1991 March 8, 1991
May 2003 April 11, 2003
November 2008 November 28, 2008
February 2016 January 29, 2016
The six major highs in the gold to silver ratio are marked above with green ovals, and also marked below on the log scale chart of COMEX silver. Note that 5 of 6 price lows were accurately indicated by the ratio highs, with the November 2001 price low being a minor exception.
SO WHAT?
Using the above simple analysis, silver hit a multi-year low in December 2015 and has confirmed that low by closing above its 5 week moving average AND registering a gold to silver ratio slightly above 80, the highest in about 20 years and the most extreme peak since the 2008 crash lows in gold and silver prices.
Silver hit a low on December 14, 2015 at $13.61. The price on Feb. 24, as this is written, is $15.43, nearly $2 higher. Of course the paper silver market will flop around as it is managed by High Frequency Trading but the ratio provides more evidence that a silver bottom occurred about two months ago.
Conclusion
Note the logarithmic lines on the silver price chart above. The lines are somewhat arbitrary but roughly represent a lower bound, a middle trend-line, and an upper blow-off line.
- The middle trend-line passes through $25 in 2016
- the red line shows that $50 silver is one good rally away.
- We will see $50 silver…perhaps in 2017.
“Follow the munKNEE” on Facebook, on Twitter or via our FREE bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner)
Related Articles from the munKNEE Vault:
1. Silver:Gold Ratio Suggests +$200/ozt Silver Quite Plausible! Here’s Why
Given the fact that a) the historical movement of silver is 90 – 98% correlated withgold-silver gold, b) silver is currently greatly undervalued relative to its average long-term historical relationship with gold and c) many analysts predict a parabolic rise in the price of gold over the next 5 years it is realistic to expect that silver will also escalate dramatically in price – but by how much? This article applies the historical silver to gold ratios to come up with a range of prices based on specific price levels for gold being reached.
2. The Gold-Silver Ratio: Here’s What It Indicates Could Happen Soon
The gold-silver ratio is the relative valuation of the two precious metals, and in consideration of the described trading pattern it can provide an indication of the maturity of a bull or bear cycle. Market tops for gold and silver are typically accompanied by low gold-silver ratios (silver outpacing to the upside), and market bottoms are typically accompanied by tops in the gold-silver ratio (silver outpacing to the downside). So what is the gold-silver ratio saying these days?
3. Gold:Silver Ratio Suggests Much Higher Future Price for Silver – MUCH Higher!
The majority of analysts maintain that gold will reach a parabolic peak price somewhere in excess of $5,000 per troy ounce in the next few years. Given the fact that the historical movement of silver is 90 – 95% correlated with that of gold suggests that a much higher price for silver can also be anticipated. Couple that with the fact that silver is currently greatly undervalued relative to its average long-term historical relationship with gold and it is realistic to expect that silver will eventually escalate dramatically in price. How much? This article applies the historical gold:silver ratios to come up with a range of prices based on specific price levels for gold being reached. Words: 691
4. Apply Gold:Silver Ratio Ups & Downs to Greatly Increase Your PM Holdings – Here’s How
Should you buy & hold your gold or silver or switch back and forth depending on the gold/silver ratio? This article examines 3 scenarios and identifies certain rules that should be followed to make the most of the ups and downs of the gold/silver ratio to substantially increase your holdings over time.
5. Don’t Ignore Silver; Its Time has Come!
Gold and silver generally move in sync with each other and tend to move in the same direction. The relationship is such that there’s even an indicator that measures it – the gold/silver ratio. Many investors use the ratio to spot extremes in the pricing of either precious metal, and to spot trends, whether up or down. The ratio currently sits at approx. 80:1 and suggests that silver has some catching up to do.
6. Silver: $100/ozt. Reasonable By 2020 – 2022 Or Sooner
The global financial system is increasingly unstable and fragile, even more so than in 2008. The important question these days is: How will governments, central banks and financial systems respond to the ongoing crisis? Future prices for silver are dependent upon the answer to that question. I suggest three possible scenarios.
7. Silver Has Bottomed & Is On Its Way To $35/ozt.
Silver looks like it has bottomed and will move substantially higher. Here’s why.
8. Anticipating $200-$400 Silver Is Ridiculous – But What If…?
$200 or $400 silver is outrageous when we think in terms of today’s dollars, euros, and yen but what if…
9. Once Silver Finds Bottom It Should Rebound By 350% – Here’s Why
Spectacular bull markets in silver are not a fantasy and are not anomalies. In the last 35 years, silver has had a perfect record of strong bull markets after a bear market. A 350% gain is what can be expected once silver finds a bottom. Here’s why.
10. JP Morgan Is Stockpiling HUGE Amounts of Physical Silver – Why?
Why in the world has JP Morgan accumulated more than 50 million troy ounces of physical silver since early 2012, adding more than 8 million troy ounces during the past couple of weeks alone? Why are they doing this? What do they know that the rest of us do not? Could it possibly be that they are anticipating another great economic crisis? We are definitely due for one! Here’s what I think is going on behind the scenes.
11. It’s Worth Owning Silver Bullion and/or Equities – Here’s Why
Is it worth it to hold silver bullion or equities in a portfolio? Yes, and the reasons an investor should consider exposure to silver can be summed up with three key points.
Links to More Sites With Great Financial Commentary & Analyses:
ChartRamblings; WolfStreet; MishTalk; SgtReport; FinancialArticleSummariesToday; FollowTheMunKNEE; ZeroHedge; Alt-Market; BulletsBeansAndBullion; LawrieOnGold; PermaBearDoomster; ZenTrader; CreditWriteDowns;