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Gold-silver ratio: silver price lags behind the rise in gold prices: silver undervalued? | message


• Silver known as “poor man’s gold”
• Silver price lagged behind gold’s rise
• Expert: Silver undervalued or gold overvalued


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Silver is often referred to as “the poor man’s gold”. That’s because “some of the same factors that drive gold prices up are doing the same to silver prices,” said MarketWatch Ed Moy, chief market strategist at gold dealer Valaurum. Currently, the uncertainty on the market about the recovery of the global economy and the concern about the devaluation of money are causing increased interest in gold. A weak dollar also serves as a price driver for the two precious metals, as it makes silver and gold, which are traded in the US currency, cheaper and thus increases demand.

Although silver is more volatile than gold, the precious metal offers an interesting investment for investors, because silver costs significantly less per ounce than the “safe haven” popular with investors – according to Moy, the silver price has also “lagged behind the rise in gold”.

Gold-silver ratio very high

“It has been clear for some time that silver was excessively cheap compared to gold,” said MarketWatch Ross Norman, CEO of precious metals news and information company Metals Daily. The ratio between the metals rose to a 4,000-year high of 126 on March 18, according to Norman. This came about because the effects of the Corona crisis were particularly severe at this time and investors fled in droves in gold. Meanwhile, they feared a decline in demand for silver, which also serves as an industrial metal, due to the effects of the pandemic on the economy. Thus there was a correction in the silver price, while the gold price rose.

Although the ratio has declined significantly in recent months, it is still well above the typical gold to silver ratio that Ed Moy sets at 60 ounces of silver for one ounce of gold. The fact that the gold-silver ratio is so historically high means that either gold is overvalued or silver is undervalued, said Moy – and if silver is undervalued, there is a lot of money to be made.

Still room for improvement

According to Ryan Giannotto, research director at the publicly traded fund issuer GraniteShares, silver is “not even halfway to its all-time high”. While it is unlikely that silver will more than double in the near future, it is “unwise to rule out extreme scenarios”. Goldman Sachs is also assuming that prices will continue to rise: after silver recently rose to its highest level in seven years, the experts at the major US bank raised their forecast for the silver price from 22 US dollars to 30 US dollars, in addition to their gold price forecast Dollars on.

Since the price of silver is traditionally subject to strong fluctuations, Giannotto recommends that those who invest their money in silver consider “balancing their exposure with other historically less volatile precious metals such as gold or platinum”. editors

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