Gold to Silver Ratio Falling
This ratio shows the amount of silver it takes to equal one ounce of gold in price. When the ratio is rising it means that gold is outperforming silver; when the ratio is falling it means that silver is outperforming gold.
The gold to silver ratio is currently at 106 and falling after hitting an all-time high of 126:1. The average ratio in modern times is about 50:1, with the long-term historical average dating back 5,000 years being closer to 15:1. In recent times, 80:1 was about the peak we would see in the ratio before it would fall again, so the recent jump to 126 was more than likely a once-in-a-lifetime event as silver became severely undervalued compared to gold.
The chart currently shows three yellow price candles which indicates that extreme bullish volatility was experienced in the move up as gold outperformed silver. This was most likely due to investors fleeing to gold due to its main function being a store of value, while silver failed to see the same gains due to it mostly being an industrial metal, and since global production has dropped off during the virus outbreak silver was not in high demand. That trend appears to now be shifting in silver's favor due to the extreme disconnect in the ratio.
The three yellow price candles show a strong move up on the first yellow candle, followed by a second yellow candle with a small body and long lower wick, and now the current price candle is retreating. This three-candle pattern resembles a hanging man reversal candle pattern with the second yellow candle being the hanging man candle. This occurs when the price of an asset sees high demand, and then a sudden pause as traders become indecisive, followed by a reversal. This pattern tends to mark the top of price advance, and since we are looking at the gold-to-silver ratio it likely means that we have seen the end of gold outperforming silver, at least in the short-term, and can expect silver to now begin to outperform gold.
The expected move going forward is a decline in the ratio back to 80:1, and more than likely being followed by an undershoot back down to 50:1. If you're playing precious metals, now would be a good time to go heavier in silver trades and then convert back to gold when the ratio hits 50:1 or lower.
The gold to silver ratio is currently at 106 and falling after hitting an all-time high of 126:1. The average ratio in modern times is about 50:1, with the long-term historical average dating back 5,000 years being closer to 15:1. In recent times, 80:1 was about the peak we would see in the ratio before it would fall again, so the recent jump to 126 was more than likely a once-in-a-lifetime event as silver became severely undervalued compared to gold.
The chart currently shows three yellow price candles which indicates that extreme bullish volatility was experienced in the move up as gold outperformed silver. This was most likely due to investors fleeing to gold due to its main function being a store of value, while silver failed to see the same gains due to it mostly being an industrial metal, and since global production has dropped off during the virus outbreak silver was not in high demand. That trend appears to now be shifting in silver's favor due to the extreme disconnect in the ratio.
The three yellow price candles show a strong move up on the first yellow candle, followed by a second yellow candle with a small body and long lower wick, and now the current price candle is retreating. This three-candle pattern resembles a hanging man reversal candle pattern with the second yellow candle being the hanging man candle. This occurs when the price of an asset sees high demand, and then a sudden pause as traders become indecisive, followed by a reversal. This pattern tends to mark the top of price advance, and since we are looking at the gold-to-silver ratio it likely means that we have seen the end of gold outperforming silver, at least in the short-term, and can expect silver to now begin to outperform gold.
The expected move going forward is a decline in the ratio back to 80:1, and more than likely being followed by an undershoot back down to 50:1. If you're playing precious metals, now would be a good time to go heavier in silver trades and then convert back to gold when the ratio hits 50:1 or lower.
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