Is the Gold Silver Ratio Predictive

By: Bob Loukas | Mon, Feb 13, 2017
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Gold Silver Ratio

Gold and Silver Coins

One aspect of the precious metals market today that I like is the Gold Silver Ratio. It appears to have topped, right along with the 2016 gold bottom, and for all gold bull followers out there this is certainly a welcomed development. Precious metals bear markets always hit silver hard, while bull markets always see Silver outperform gold. As a result, the Gold Silver Ratio rises during bear markets and then falls during bull markets.

On the chart below, the long rising channel represents the precious metals bear market when gold/silver were both sold aggressively. Each peak in the ratio, as seen with the red arrows, correspond with major Cycle price lows. Meaning that as gold sold and collapsed into each yearly low, Silver as a ratio was hammered further.

But that trend has reversed, and silver has for the first time in five years outperformed gold. The chart shows the Gold Silver Ratio has turned lower, meaning that with the last big gold selloff, Silver actually outperformed gold, on a relative basis. It's not proof of a bear market low, but we do know that every precious metals bull market saw silver dramatically outperform gold. In every case, the Gold Silver ratio turn lower as the entire metals complex went higher. From my perspective, it would appear that the ratio has broken lower and that a new downtrend has been established.

Gold/Silver ratio Weekly Chart

 


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Bob Loukas

Author: Bob Loukas

Bob Loukas
The Financial Tap

Bob Loukas is the founder of "The Financial Tap", a membership site dedicated to helping traders and investors navigate the markets while increasing their expertise and understanding. Bob has over 20 years of experience in trading the markets, is a life-long student of economics, and has an abiding passion for the financial markets. Much of his investment philosophy is top-down in nature, beginning with a global and macro outlook which is used to create a framework that drives his intermediate investments.

Bob is a leading expert in Market Cycles. His love of Cycles grew after his introduction to the work of Walter Bressert, one of the pioneers in the field. Cycles were a natural fit with Bob's passion for top-down analysis. As Cycles are intertwined on multiple time frames, understanding the global outlook greatly helps him to identify the long dated Secular Cycles. From that point Bob is better able to identify the shorter Cycles and to build a cohesive investment strategy. Bob's Cycle Analyzer, a software based analytical and intelligence system, is used to predict the future movements of the major financial markets.

Originally from Sydney, Australia, he is now settled and has been working in New York City for the past 13 years. His background and education is in Computer Sciences and he holds a bachelor's degree from Monash University in Melbourne Australia. He has extensive experience in the Financial Software area and has served as a senior executive at various Fortune 50 management teams developing financial trading and reporting software.

Happily married with two children, family is a big part of his everyday life. Other passions including golf and long distance running. He plans to complete the 2012 New York City marathon.

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