Precious metals speculators keep a close eye on the ratio between silver and gold. The year 2020 has yielded very exciting momentum in this regard, yet it seems as if silver is currently in a stronger position compared to gold.
The Silver-gold Ratio Changes
The first five months of 2020 have been subjected to a ton of volatility across all financial markets. Stocks took a massive tumble, and are still struggling to note any continued recovery as of right now. Precious metals went through a very similar trend, as both gold and silver dropped to very low levels, yet they rebounded a lot quicker.
Speaking of gold and silver, the internal ratio between both precious metals saw their own ups and downs. Since it was introduced roughly 5,000 years ago, there has always been a favoritism toward gold, both in terms of value as well as “image”. Gold is, for all intents and purposes, the leading precious metal, whereas silver is considered to be the safe haven for investors with less money to spend.
When it was first introduced, the silver-gold ratio dictated that every ounce of gold would be equal to two and a half ounces of silver. It was not a ratio that could be maintained for very long, however. In modern times, it quickly jumped to 55:1 in favor of gold. Following the volatility of 2020, it even peaked at 123:1, a level never seen before nor since.
Thankfully, things have begun to swing back to normal levels where the silver-gold ratio is concerned. Following a strong market recovery by silver, the ratio now sits near the 96:1 mark. It is still relatively high, all things considered, but things could be worse at this time. Compared to late December 2019, there is still a near 13% increase in this ratio, indicating that more volatile momentum could erupt at any moment.
An Overall Bullish Signal
As both of these precious metals keep trying to one-up one another, the overall market sentiment is very bullish for both silver and gold.
Silver bounced back from its lowest level since 2009 when prices hit under $12 an ounce. Many expected this to be the end of the metal’s uptrend, but things have turned out very differently.
Gold also rebounded strongly, but remains under a lot of pressure near the $1,700 range. Even so, analysts and experts remain optimistic that the world’s leading precious metal will keep moving higher as the year 2020 progresses.
It is also crucial to remember that a decrease in the silver-gold ratio is a bullish sign itself. When this ratio rises, there is often a bear market. During bullish trends, the ratio tends to decrease. The lower it goes, the more bullish precious metals speculators and investors tend to become. A drop to the low of 38:1 seems rather unlikely, yet no one is able to predict the future.