Skip to main content

Gold Silver ratio helps to predict the price pattern

GOLD-silver ratio, which denotes how many ounces of silver are needed at a given point of time to buy an ounce of gold, is a handy tool to understand the direction in which the two volatile metals may move in the near future.

The ratio can help an investor to switch his holdings to gold or silver as the ratio moves up and down, thus, accumulating more quantity of both the metals.

The ratio shows how many times more expensive gold is to silver. Typically, the ratio moves in a pattern, and in normal circumstances, it helps predict which direction the prices shall move in the near future.

Between 1950s and 1980s, the gold-silver ratio has largely moved between 20 and 50. In 1980, however, it touched 100, when global economies were trying to contain inflation and were selling their gold reserves. In 1990-2000, the ratio largely remained stable.

In the past decade, the ratio has been moving gradually, but consistently lower.
The median point has remained at around 54. At the start of the year, the ratio was at 52 levels, down to a low of 32 and is at present back at 52 levels.
 
The ratio has moved significantly higher during times of economic uncertainties as gold is one of the leading safe-haven assets.
Gold is mainly an invest ment tool, while silver serves industrial purposes as well.
During stable times, it is better to invest in silver and shift monies to gold during uncertainties.
The ratio had peaked in recent times during the financial crisis of 2008-09 and the dotcom bust in early 2000. During the dotcom bust, the ratio had touched 80 and in late 2008, it shot up to 84.
How to use the ratio: At the present ratio of 52, an uninitiated investor can start putting his money in gold till it reaches 70. "One need not invest the entire amount in one go, but make a staggering investment as the ratio moves up," said Bitupan Ma jumdar, analyst, commodities and assets, JRG Wealth Management.

Once it reaches 70 and if there is an upward trend, it is time to move the gold holdings partly into silver. Almost 60 per cent of the holdings can thus be moved into silver in phases if the ratio touches 80.

The ratio moving beyond 85 levels has happened only in 1980 and this is not likely in normal situations. From 80, the ratio has come down and silver prices have started rallying.

At 80 levels, the investor should wait for the silver rally to play out and the ratio to once again drop down to levels between 50 and 55.
Between 50 and 35, he can once again accumulate gold as the ratio is only going to move up at around 35.

Along with the ratio, an investor also has to follow the macro economic factors to understand the duration of the cyclical movement in gold and silver.

The ratio can stay at higher levels for a longer period if the financial crises are triggering safe-haven buying in gold. On the other hand, if the financial markets are stable and the industrial output of key economies remain robust, the ratio can remain at lower levels for a longer time.
 

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Read more

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Read more

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now