SAMT Blog
Gold & Silver
16. May 2020, by Mario V. Guffanti
Technical Analysis
Gold and silver are two precious metals that were historically used as currency and very often in pairs. For this reason, it was always established a relationship between the two metals that was an indicator used for exchanges. For example, in China, during the Northern Song dynasty, the relation or rather the Gold/Silver Ratio, as it is technically called, was around 6.25. This indicated that the value of one ounce of gold corresponded to 6.25 ounces of silver. Also in America, starting from 1792 the Bimetallic Standard was adopted, with a ratio of 15. Today this ratio is not very useful, since gold and silver are not used as exchange currency, but it is still used by investors to understand if one of the two metals can become too expensive compared to the other when the ratio is too far from its historical mean.
The interesting thing is that on March 18th 2020, the relationship between gold and silver reached the highest historical value ever. Since that date, the ratio has started to fall very quickly. If we look at the Gold/Silver ratio chart of the last 35 years, we can see that the index, in March of this year, has made a historic top with a very steep increase, similar to those occurred in 1986, 1990 and 2008 (the period started in 2000 is characterized by a slower and more progressive rise). The ascent is similar, but in terms of speed it comes just after the 2008 rise. We can in fact ...
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