The past three weeks have been rather interesting for gold bugs. With bullion prices surging and dropping back slightly, there is still ample room for optimism. Particularly the ratio between gold and silver is worth keeping an eye on.
The Gold Price Momentum Remains Intact
During times of financial uncertainty and turmoil, safe haven assets become in high demand. Various assets can fit into this category, including precious metals. That is part of the reason as to why so many investors have pushed up the gold price over the past few weeks.
Any extensive uptrend will be met with a retrace of sorts. This particular gold price run is no different in that regard. Ever since surpassing $1,700 per ounce, the value has dropped to near $1,650 again. Stock markets and other assets are also recovering, thus this move is somewhat to be expected.
Gold-Silver Ratio Excitement
One thing traders were excited about is the gold-silver ratio. This week, that ratio hit an all-time high of 100. More specifically, an ounce of gold was worth as much as 100 ounces of silver. It is the first that the gap between both precious metals is that big in the modern era.
Several factors contribute to that ratio. Demand for silver decreased, as nearly 60% of its annual demand comes from industrial uses. The novel coronavirus forced a lot of companies to shut down temporarily.
With less work comes less demand for resources. This dip is expected to be temporary first and foremost, thus anything can happen in the months to come. Due to the lower demand, silver prices dropped below $17 for a brief moment.
It was at that moment that the price of gold surpassed $1,700. This is the only reason for the silver-gold ratio hitting 100. Now that China is slowly resuming normal operations, the demand for resources will begin to climb again. How that will affect the ratio between these two precious metals, is up for debate.
On average, an ounce of gold is worth 58 ounces of silver. Previous recessions have pushed that ratio as high at 84. This sudden jump past the previous record is perhaps indicative of what the near-term future may hold.