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SLV Vs. GLD: The 'Expected' Silver Rally May Not Come This Time

May 03, 2020 10:18 AM ETiShares Silver Trust ETF (SLV)GLD, SPY, UUP75 Comments
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Rothko Research


  • Gold prices have historically strongly co-moved with silver prices in the past 50 years.
  • However, there is no clear evidence that bullish trends in gold tend to be followed by sharp moves in silver.
  • SLV got sold aggressively during the February/March selloff, bringing the Gold-Silver ratio to new all-time highs.
  • The divergence between GLD and SLV may continue in the short to medium term.


In his essay The Fate of Empires and Search for Survival, which studies the dynamics of the human race and empires over a period of 4,000 years, Sir John Glubb finds that empires generally last for about 250 years or 10 generations, from the early age of pioneers to the final conspicuous consumers who become a burden on the heavily indebted state. Interestingly, the final stage of each empire is marked by the significant debasement of the currency. Hence, two popular commodities that have historically resisted each devaluation period are gold and silver, that some historians have also referred to as the ‘Ultimate Money.’ It is important to know that the US first began with a bimetallic standard in which the US dollar was defined in terms of both gold and silver between 1792 and 1862. The first coin act was signed in April 1792 under the recommendation Treasury Secretary Hamilton and the ratio of silver to gold was 15 to 1.

Even though we ended the Gold standard a long time ago (True Gold Standard was ended in 1933 and the ‘Quasi-Gold’ Standard ended in 1973 following the ‘Smithsonian Agreement’), investors have been questioning if the massive liquidity injections from major central banks to support markets and governments spending will eventually lead to a sudden unexpected rise in inflation and therefore a sharp appreciation in the two precious metals.

We saw in our previous article on GLD that gold has already been rising against all currencies since the summer of 2018 and is trading at all-time highs to the exception of USD and CHF. On the other hand, silver prices have remained flat. Figure 1 shows the value of silver against the G8 most liquid currencies; we can notice that the uncertainty over Brexit has led to a little rise in silver

This article was written by

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Rothko Research provides frequent analysis and updates on the current global macro themes. Looking at the financial markets from different perspectives, using either economic, political or financial factors, we are not afraid to go against the general consensus and challenge the conventional wisdom.//twitter: @RothkoResearchWebsite: https://rothkoresearch.com/

Analyst’s Disclosure: I am/we are long USDJPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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