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

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more

Reliance Regular Savings Fund - Debt Option

Reliance Regular Savings Fund - Invest Online     The scheme aims to generate optimal returns consistent with moderate levels of risk. It will invest atleast 65 per cent of its assets in debt instruments with maturity of more than 1 year and the rest in money market instruments (including cash or call money and reverse repo) and debentures with maturity of less than 1 year. The exposure in government securities will generally not exceed 50 percent of the assets. The fund uses a mix of relatively low portfolio duration with active investments in higher-yielding corporate bonds. It does not take aggressive duration calls but tries to improve returns by cherry-picking corporate bonds. This is reflected in the fund's returns matching the category and benchmark for five years - at 8.4 per cent - but lagging behind the category during a raging bull market in bonds in the last one year. The fund has been a consistent but not chart-topping performer in the income category. Despite its ...
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

IIFL NCDs

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) IIFL NCDs IIF's six-year unsecured NCD 2012 Risk-wary investors should stay away from this issue, and even, risk-taking ones should think twice It is a public issue of unsecured redeemable non-convertible debentures ( NCDs ) by India Infoline Finance ( IIF ), an unlisted company, which is a 98.9 per cent subsidiary of India Infoline, a listed company. The issue seeks to raise Rs 250 crore with an option to retain over-subscription up to Rs 250 crore taking the total potential issue amount to Rs 500 crore. It will be open for public subscription from September 5 to September 18 with a minimum application size of Rs 5,000 in the form of five NCDs of face value Rs 1,000, TENURE & RATES: IIF will redeem the NCDs at the end of six years, and investors wanting out before six years will be able to sell the...
Read more

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...
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