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 much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...
Read more

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...
Read more

Reliance Health Total

  Reliance Life Insurance has launched Reliance Health Total, a non-linked, non-participating and non-variable health insurance plan . It provides a fixed benefit cover for hospitalisation, critical illnesses and surgeries. The customer can also make a claim for over-the-counter health-related expenses. This is a regular-pay, five-year plan that can be renewed till the age of 99. The plan comes with two options: customers can choose a higher medical reimbursement benefit or a higher sum insured. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - I...
Read more

Compared to Bank FDs, Debt Mutual Funds are more Tax-Efficient

It is a security vis-a-vis returns battle between bank fixed deposits and debt funds In the past few months, banks have been consistently increasing their rates of interest on different fixed deposits. And after the Reserve Bank of India's Annual Monetary Policy, even the saving deposit rates are up at 4 per cent. For a six-month fixed deposit, you can easily get a rate of anywhere between 6 and 7 per cent annually. However, experts feel if one is looking to invest for less than a year, debt funds could make a better choice. The reason: Liquid funds and ultra short-term funds are giving annualised returns of 8 per cent. Financial advisors suggest retail investors opt for mutual fund schemes as they are more flexible and give higher post-tax returns. Opt for fixed deposits only if you are comfortable being locked-in for the tenure as a premature exit can attract a penalty. If your main aim is to ensure liquidity, debt funds are preferable. Though a fixed deposit gives you a...
Read more

Right Size your SIPs in terms of tenure and amount

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)    Systematic investment plans ( SIPs ) are here to stay. Going by the growing number of SIPs, it does look like investors have taken to them in a big way. Today as much as . 1,000 crore flow into SIPs every month. A SIP, as the name denotes, is a method to invest a fixed amount in a mutual fund at regular intervals --generally monthly or quarterly. It is easy to do and the minimum amount with most mutual funds is a mere . 1,000 per month. You can write post-dated cheques for your investment, or give an auto-debit facility from your bank account. In fact, most investors today prefer setting up an auto debit for their SIPs, since writing cheques is cumbersome. Also, you can choose any tenure that you want for your SIP — six months, one year, five years, 10 years or even opt for a perpetual SIP which will continue forever till you stop it....
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