Gold-Silver Ratio Rises To More Than 20-Year High
On Tuesday, silver prices fell to their lowest level in 2.5 years; meanwhile the gold market has managed to hold around the critical psychological barrier around $1.200 an ounce. December silver futures settled Tuesday’s session at $14.153 an ounce down 0.20% on the day and December gold futures settled the day at $1,202.20 an ounce, up 0.20% on the day.
Silver’s underperformance caused the gold-silver ratio on Kitco.com to spike above 85, the highest level since September 1993. The ratio measures how many ounces of silver equals the price of one ounce of gold. The historical average for the ratios is around 50.
Phillip Streible, senior market analyst at RJO Futures said that copper is weighing down silver, which is also considered an industrial metal. Copper continues to hold near a one-year low as concerns that growing trade tensions will lower global economic growth.
Although silver continues to significantly underperform the precious metals market, Streible said that he sees potential for the metal to eventually find its luster again.
“If we see a resolution in trade talks with China then I think you will see copper and silver start to rally,” he said. “Gold doesn’t have much momentum, with the price struggling around $1,200 an ounce. If global growth picks up then nobody will want gold as a safe-haven and silver will start to outperform.”
However, other analysts aren’t convinced. Bill Baruch, president of Blue Line Futures said that gold appears to be building a base around $1,200.
“While silver’s downside is limited there is not a lot of enthusiasm for the metal right now,” he said. “I think gold is a safer play in the near-term. Gold has been constructively holding its ground at $1,200 an ounce. 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, he added that the bank sees a glimmer of hope.
Ghali explained that the latest trade data from the Commodities Futures Trading Commission showed bearish speculative positioning among money managers at record highs. He also noted that the data reported that commercial investors, who are traditionally short on the market, are now holding net long positions for the first time in years.
“Commercial investors are the most knowledgeable group that trades these metals and they are starting to see value in the market,” he said.