Gold-Silver Ratio Rises To More Than 20-Year High
(Kitco News)- The silver market just can’t seem to catch a break as itsperformance compared to gold has fallen to its lowest level in 25 years.
On Tuesday, silver prices fell to their lowest level in 2.5years; meanwhile the gold market has managed to hold around the criticalpsychological barrier around $1.200 an ounce. December silver futures settledTuesday’s session at $14.153 an ounce down 0.20% on the day and December goldfutures settled the day at $1,202.20 an ounce, up 0.20% on the day.
Silver’s underperformance caused the gold-silver ratio onKitco.com to spike above 85, the highest level since September 1993. The ratiomeasures how many ounces of silver equals the price of one ounce of gold. Thehistorical average for the ratios is around 50.
Phillip Streible, senior market analyst at RJO Futures saidthat copper is weighing down silver, which is also considered an industrialmetal. Copper continues to hold near a one-year low as concerns that growing tradetensions will lower global economic growth.
Although silver continues to significantly underperform theprecious metals market, Streible said that he sees potential for the metal toeventually find its luster again.
“If we see a resolution in trade talks with China then Ithink you will see copper and silver start to rally,” he said. “Gold doesn’t havemuch momentum, with the price struggling around $1,200 an ounce. If globalgrowth picks up then nobody will want gold as a safe-haven and silver willstart to outperform.”
However, other analysts aren’t convinced. Bill Baruch,president of Blue Line Futures said that gold appears to be building a basearound $1,200.
“While silver’s downside is limited there is not a lot ofenthusiasm for the metal right now,” he said. “I think gold is a safer play inthe near-term. Gold has been constructively holding its ground at $1,200 anounce. We have seen a few big washouts in silver.”
Daniel Ghali, commodity strategist at TD Securities,described silver as the most unloved precious metal out there; however, headded that the bank sees a glimmer of hope.
Ghali explained that the latest trade data from theCommodities Futures Trading Commission showed bearish speculative positioningamong money managers at record highs. He also noted that the data reported thatcommercial investors, who are traditionally short on the market, are nowholding net long positions for the first time in years.
“Commercial investors are the most knowledgeablegroup that trades these metals and they are starting to see value in themarket,” he said.
For Kitco News
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