Gold to Silver ratio favors Silver on break of 77.03
21 January 2022 close: Our last update was year-end 2021 with the ratio slightly up in the first week of January and then steadily falling into the current 75 handle. This week saw tyhe Gold/Silver ratoi penetrate an 11 month channel with up-sloping support line since June 2021 which broke support at 77.03 closing lowewr for 3 days in a row. This is a bearish signal. It would be typical for the market to rally back into the support area, but wthe medium and long term risk weight pattern suggests a stronger Silver versus Gold in coming months. Even though the monthly time interval risk weight is still up it has moved up to the 70% risk level from around 10% risk weight on a 10% price move from 68 to 75. If Monthly turns down, possibly in February our initial 50 year average target of 57.00 is in sight. No Change to current balanced allocation.
31 December 2021 close: Year end action was slightly in favor of Silver again. Our prediction that the Gold to Silver ratio will return at least to its 50 years average of 57 is very much in play. The only time delay may be caused by the quarterly chart looking still corrective since the large correction down from 1.25. Next updates at slower intervals and only if we change our view to re-allocate.
17 December 2021 close: The Gold to Silver ratio was very strong during the larger 2 day metals sell off which typically drives Silver volatilty higher. The recovery however in favor of Silver came in as could be expected with Silver moving faster again on its way up. The technical picture, short, medium and Monthly time interval is still leaning in the direction of a larger move, currently on pause, in favor of Silver. Quarterly is in an uptrend from a low nominal level and could hinder an early continuation, however not conclusive. Thus, the Gold/Silver ratio correction up may not be quite finished but it looks to be getting closer if not already set at last weeks top. No Change.
03 December 2021 close: Daily risk weight has turned down after the Gold to Silver ratio touching 80.20 on Thursday. It is always hard to predict where this correction will end but the super cycle scenario points towards the technical condtion of a new low being made sometime in the near or more distant future. The Weekly and Monthly time intervals show an historically weak correction upward. Like Platinum, a Silver shakeout would present with an extraordinary opportunity to buy more and not as a signal to remove the silver allocation. It is a matter of time for Silver to reach again its long term equilibrium versus Gold. The interim quarterly chart below show a pattern that does appear often and resembles most the 1990's period where silver ended the rally against gold at around a price ratio of 50 Silver ounces to one Gold ounce. We would expect this type of move to play out again in the coming few years. Hence a slight overweight silver in our metals portfolio.
GOLD/SILVER Ratio Risk Position relative to Quarterly, Monthly, Weekly and Daily risk weight data.
(Previous update in brackets)
|Trend||↑ (↑)||↓ (↓)||↓ (↑)|
|71 (68)||58 (60)||10 (23)|
Portfolio allocation 40% (40%)