Finance and Stock Trading News

Gold-silver ratio crumbles to 28-year low

With silver trading at its highest prices in 31 years, the gold:silver ratio is tumbling rapidly. On Friday, the gold:silver ratio hit its lowest level in 28 years near 35. A growing number of uncertainties in financial markets have investors piling into precious metals as no ones quite sure when the next big shoe is going to drop.

Id say that from a macro/fear standpoint this is most like 2008 only its not the banking system thats blowing up (that was around Bear Sterns time) it is the Sovereign debt, the US dollar and the Arab world that are on fire, MontyHigh writes at WorldofWallStreet. I would say the current charts eight in-a-row white candles looks a lot like the beginning of 2008s ten-in-a-row white candle run leading up to its parabolic peak.

Back in 2008, silver rose more than 24 percent in a month, only to plateau then take a huge 16 percent plunge in a single day of trading. That sobering fact should keep investors on their toes. But there may be more to it then just a manic buying spree.

Institutional investors have long been calling for a parabolic rise in silver that will close the large gap in the gold:silver ratio. Back in February. Eric Sprott of Sprott Asset Management was calling for the gold:silver ratio to hit 16 in the not-so-distant future a level that would likely see silver upwards of $80 an ounce.

In an interview last week, Sprott called silver the investment of the decade.

“I’ve always thought that silver would move quickly to $50, and it would move to $50 this year – I thought it would get to $50 before year end,” Sprott told MineWeb. “If you ask me in the three to five year time frame, obviously I think it’s going to go north of $100 simply because we’ll get that 16:1 ratio.

“Silver is the investment of this decade as gold was the investment of the last decade, he says. So we’re sitting back waiting for things to evolve here.

The gold:silver ratio has traded in a range between 42 and 85 for 15 years. Sprott chalks up todays ratio change to industrial demand for solar panels and other high-tech industries. But changes of this scale and at this speed are unprecedented. There are obviously other factors at work things like fear and greed. Even more than that, though, the spike in silver prices indicates just how tenuous the global markets have become.

Unlike in 2008, investors dont feel comfortable crawling into a cave with dollar bills in their hands as the dollar itself is under assault by the loose monetary policies at the Fed. Silver has become the investment du jour. It could just as quickly become the short du jour. but silvers showing no signs of weakness in early trading this week.

I agree with MontyHigh when he says its looking a lot like 2008 right now. The difference is there are few places to turn outside of gold and silver. If that other shoe drops soon, the markets are going to be in for a lot of pain. And I wont even predict where the gold:silver ratio could end up. I do know, though, that I wouldnt want to be holding dollars this time around.

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