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

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...
Read more

Choose gold ETF over Physical Gold

Investing in gold is overall a good portfolio hedging strategy as long as gold does not account for more than 5-10 per cent of your investment portfolio. Between physical gold and gold ETF, investing in gold ETF is a better proposition because these funds invest in physical gold making them the closest to investing in physical gold at no risk of holding physical gold.   You will need to have a demat account to invest in gold ETFs and there is little to choose between any of the gold ETFs, you can pick any fund that you wish to as long as you pick the fund with the lowest expense ratio.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Reliance Mutual Funds: http://prajnacapital....
Read more

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...
Read more

JM Financial Mutual Fund - Its Schemes

  JM Financial Mutual Fund is a part of JM Financial Group which is one of the first mutual fund companies in India which started its operation in 1993-1994. JM Financial Asset Management Limited is sponsored by JM Financial group. The mission of the group company is to generate good returns in all the product categories. JM Financial Mutual Fund has launched a variety of schemes in the following categories. ·                            Equity ·                            Debt ·                            Arbitrage ·                            Liquid Equity Schemes: The schemes that are launched in the equity category are: ·                            JM Midcap Fund ·                            JM Balanced Fund ·                            JM Agri and Infra Fund ·                            JM Basic Fund ·                            JM Contra Fund ·                            JM Contra Fund ·                            JM Emerging Leaders Fund ·             ...
Read more

Birla Sun Life MIP II Savings 5

  Birla Sun Life MIP II Savings 5 - Invest Online   Have you traditionally been a debt investor but now wish to test waters in equities? Then, debt-oriented funds such as Birla Sun Life MIP II Savings 5 (Birla Savings 5), which have limited exposure to equities, may fit your requirement. With a five year return of 10.5 per cent compounded annually, the fund managed a good 3-3.5 percentage points more than its benchmark Crisil MIP Blended Index, as well as its category average. The fund appears well poised to capitalise on a falling interest rate scenario and has increased the average portfolio duration of its debt instruments in recent times. Suitability Birla Savings 5 is suitable only for conservative investors. If you want to make a beginning in equities and cannot take any short-term declines in your stride, then this fund will suit you. If you are already an equity investor and want to use a debt-oriented fund merely as a diversifier, then you may prefer peers from the HDFC and Re...
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