Silver Is Too Rich vs. Gold

 |  Includes: DBS, GLD, IAU, SGOL, SIVR, SLV
by: Richard Shaw

We think silver is too highly priced versus the price of gold.

They are both precious metals, but are not driven entirely by the same factors. Silver has more industrial attributes than gold. Therefore, one would expect silver to become more valuable relative to gold in an improving economy, but it seems to have gone outside of historical boundaries.

This 20-year monthly chart shows the price ratio of silver to gold, along with the 1-year, 3-year, 5-year and 10-year averages of that ratio (in red in the legend).

Click to enlarge

Click to enlarge
While the ratio has backed off a bit recently, it is still well above the 0.016 to 0.019 range indicated by the moving averages.
Click to enlarge
Click to enlarge

The ratio has been above the averages for extended periods, and it may well remain there for months to come, but as a long-term matter, we think silver is not the place to be.


Disclosure: We hold GLD some but not all managed accounts, and some SLV which we are reducing, as of the publication date of this article.

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