Gold price buys about 78 ounces of silver, most since August.
Ratio has only been above that level five times since 1996.
It’s time for silver to outperform gold, if history is any guide.
With gold trading near a two-month high, its price buys 78 ounces of silver, near the most since August. In the past two decades, the gold to silver ratio has only been above that level on about five occasions, and never for more than a three months.
Gold pauses after rising sharply in recent sessions, but it may be a shortlived break. “We have had guys booking profits today” after the metal spiked above US$1,110 an ounce, says Alex Thorndike, a Sydney-based precious metals dealer at MKS. “But with the share market off and the yuan trading lower, the uncertainty is drawing people back into gold” in places such as Shanghai and Tokyo, he says. Turmoil in Chinese markets could trigger higher-than-usual demand for the precious metal heading into the lunar new year, already a popular time for gold buying in Asia, says Thorndike.
Gold has fared better this week as global market turmoil and geopolitical tension in the Middle East and Asia prompted investors to seek a haven. Silver has lagged because industrial uses account for half of its demand, compared with about 10 percent for gold. History shows gold hasn’t been able to better silver for long during a crisis: while the ratio surged over two months in 2008, the cheaper metal then outperformed over the following year.
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