by Gary Christenson
The gold to silver ratio has been used for years to indicate buy and sell zones in both gold and silver. Why?
- At BOTTOMS in both gold and silver, based on 40 years of history, silver prices have fallen farther and faster than gold. Hence the gold/silver ratio reaches a relative high.
- At tops in both gold and silver the ratio is often low since silver rises more rapidly than gold. As Jim Sinclair says, “silver is gold on steroids.”
Examine the following graph of the gold to silver ratio (monthly data) for the past 40 years. I have circled the six most extreme highs in the ratio with green ovals.