Gold/Silver Ratio Still Widening

By Brad Zigler

For the week ending Thursday, spot gold - basis the London morning fix - was up 1% at $872.25; silver, at $16.58, was off 0.4%. The gold/silver ratio widened 1.4% to 52.6-to-1. The ratio last peaked at 57.3-to-1 in December before tumbling to 47.4-to-1 in early March as silver and gold reached their record-setting zeniths.

The DB Double Short Gold ETN (NYSE Arca: DZZ) lost 7.2% on the week while the iShares Silver Trust (AMEX: SLV) gained 4.4%.

Gold/Silver Ratio

Both metals remain locked in intermediate-term downtrends, so rallies will likely attract traders looking for selling opportunities. Technically, silver is the weaker of the two markets. Watch for tests of support at $854 basis June gold and $16.51 on the July silver contract.

Things looked relatively better for mining stocks this week. Buoyed by a resurgent equities market, the Philadelphia Gold/Silver Index (PHLX: XAU) notched up 5.7% to 182.16. The broader-based AMEX Gold Miners Index (AMEX: GDM) gained 4.3%, which translated into a 4.2% increase in the price of an exchange-traded fund, the Market Vectors Gold Miners ETF (AMEX: GDX), that tracks the index.

Gold vs. Gold Stocks

Comments

[Donaldo:]

I don't mind saying I can't discover the way to read the first chart. What measurements does it actually represent? I even copied it into my photo image application and zoomed in, which helped less than I'd hoped, but I'm still groping for a clear idea of what you're pointing out. Let's see... You refer to a 47.4-to-1 in early March. Uh... I'm back to: I don't mind saying I can't discover the way to read the first chart.
This is truly a topic of interest though.

2008 May 11 05:29 PM

[Managing Ed...:]

Donaldo -

The green line at the bottom of the chart tracks the gold/silver ratio (gold over silver) basis the daily London AM fix. "47.1" means one ounce of gold, at market prices, could purchase 47.1 ounces of silver.

The blue and red lines, however, trace the indexed values of the DB Gold Double Short ETN (DZZ) and the iShares Silver Trust (SLV). By "indexed" I mean that each security's starting price set at "100" to make their price actions directly comparable.

2008 May 11 08:00 PM

[oro-plata:]

What in your opinion is considered to be the most fair and proper "Ratio" historically between Gold & Silver? I have always heard about these ratios and interested to know what is considered the normal ratio.

2008 May 14 01:01 PM