Gold – Silver Ratio at 10 Month Lows As Silver Hits Six-Year Highs

Gold prices
Gold prices

Gold to silver ratio trades to the lowest level since September 24, 2019, as the rally in silver prices, hit six-year highs. Silver managed to outperform gold in the last two weeks as the reopening of the economies increases the demand for silver and base metals.

The gold/silver ratio indicates the strength of gold prices versus the silver. The ratio shows how much one ounce of gold is worth in ounces of silver. For the last fifty years, the gold-silver ratio is averaging 56.7. The last decade the average gold/silver ratio stands at 69.

In the first quarter of 2020 gold outperformed silver amid the coronavirus crisis as investors shift their attention to safe-haven assets. On the other hand, silver failed to follow the rally in gold prices as the demand for industrial silver dropped due to the lockdown measures.

The ratio correction that started since March highs at 126 accelerated after the ratio breached below the 200-day moving average the previous week. A weaker dollar in the last two weeks also supports the silver and other dollar-denominated commodities.

Gold to Silver Technical Analysis

Gold/silver ratio trades 2.39% lower at 84.38 having hit earlier today 81.40 the lowest level since September 2019. The technical picture has turned bearish the last two weeks as the ratio breached below the 200-day moving average. Investors have to be cautious as the RSI 14 for the ratio is now in deeply oversold levels so a sharp rebound can’t be ruled out. 

Silver makes four consecutive higher highs mirroring Gold price which also made four successive higher highs making fresh nine-year highs. The silver has reached extreme overbought levels at 86.23 also sending a warning signal for bulls.   

Gold price technical outlook is bullish, but the precious metal has also entered the overbought area as indicated by the RSI index. A sharp correction can’t be ruled out as traders might proceed with profit-taking at the nine-year highs. 

Gold/silver faces strong support at 81.40 the daily lows, while a break below will translate at 24 silver price if the gold price remains at the current level. 

On the upside, the gold/silver ratio first resistance stands at 86.49 the daily top and then at 91.32 the high from yesterday’s trading session. 

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Gold to Silver Ratio Daily Chart

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