Last December, we published an older version of the chart below which shows the recent history of the gold:silver ratio and it’s relativity to gold and silver price movements. We noted that when the ratio (red line) had been at historically high levels (top green circles) previously, a correction of this ratio back to lower levels (lower green circles) had resulted in a significant increase in the silver price over a relatively short period.
The gold:silver ratio has sustained a solid and steady gain over the last five years but as can also be seen in the chart, it has finally broken it’s long term trend channel with a very sharp decline in recent days. This sharp decline is similar to topping out events in 2003 and 2008 where relatively rapid correction events occured. As we mentioned in December, both of these periods represented very profitable buying opportunities for silver. We see this recent break in the uptrend as technically significant and worthy of closer near term monitoring.
Like all trading, it’s extremely difficult to pick the peaks and the troughs and there is always the possibility for continued downside in the silver price. Over the longer term however, if you are looking to invest in the bullion market, recent history certainly suggests that now continues to be a very good time to take a closer look at starting or increasing your silver investment.
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