Does the drop in the gold-to-silver ratio indicate a buying opportunity?
*The Wall Street Journal, by Stephanie Yang, April 19, 2016
”On Tuesday, silver hit its highest level in more than 10 months, and its more than 4% gain helped silver narrow its price gap with gold. The gold-to-silver ratio fell to its lowest level in four months on Tuesday at 74. In March, the ratio hit its highest level since 2008 at 83, according to FactSet data.
That recent divergence in price has sparked some buying in silver, as traders bet that the ratio between gold and silver will revert back to its average level. It’s a phenomenon we noted in our Morning MoneyBeat column just last week.
‘There has been a lot of chatter on gold-silver ratios, and how far it’s gotten,’ said Frank McGhee, head precious metals dealer at Alliance Financial. ‘There was a lot of generalized hope that the [silver] market was going to move forward.’
A high gold-to-silver ratio can also be seen among investors as a warning sign for the economy. Silver, which has more industrial uses than gold, has suffered amid worries over global growth. Those same worries have sent gold prices soaring as a safe-haven store of wealth.”
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.