The gold-silver ratio has exploded to one of the widest margins in history, with gold trading almost 85 times the price of silver. The ratio set by law is supposed to be 15-to-1; how did we get to 85-to-1? This is the highest level since the 2007-2008 global financial crisis.
To some degree, having such an extensive history on how the prices of gold and silver relate to one another can be useful for investors. Today’s ratio of nearly 85-to-1 would certainly suggest that silver could be the more attractive investment opportunity than gold at these prices. Of course, markets don’t have to make sense and the ratio could widen still.
When investing in any financial product, hard asset or commodity, there are no rules, only probabilities. Although we like both gold and silver here because of the large spread, we would be bigger buyers of silver. We are looking for both gold and silver to break out to the upside, but first we must suffer through the pain of consolidation.
By Todd ‘Bubba’ Horwitz
Contributing to kitco.com