ETFs and the Gold/Silver Ratio
March 1st 2012 at 6:00am by Tom Lydon
Technical analysts continue to closely watch the gold/silver price ratio to get a feel for investor sentiment on precious metal and where the trend may be heading.
Silver prices recently moved above the 200-day moving average but fell hard in Wednesday’s sell-off as Federal Reserve Chairman Ben Bernanke threw cold water on QE3 speculation. [Gold, Silver ETFs Tumble]
“Silver is now up a whopping 30% year to date, making it the best performing precious metal so far in 2012,” Edward Meir, senior commodities analyst with INTL FCStone, said in a WSJ.com report. [Silver ETFs Advance as Metal Retakes $36]
Traders consider silver moving past its 200 day-moving-average as a signal of a change in the market trend. The ratio between gold and silver prices is at 48, the landmark level that gold buyers look for before purchasing silver, said Meir. The gold-to-silver ratio has hit its lowest level in five months, reports Myra Saefong for MarketWatch.
Silver prices are rebounding thanks to the better-than-expected U.S. data reports, sparking more interest in the metal due to its industrial applications. A slightly weaker U.S. dollar has also been favorable for gold and silver prices. [Silver ETF at Five-Month High]
In 2012, gold has returned about 13% year-to-date, while silver has given back 27% over the same time period. [Gold ETFs on a Tear as Metal Pushed Toward $1800]
Analysts say silver prices could reach about $45 an ounce before they see demand-side destruction. Furthermore, silver prices could receive continued support due to rising inflationary expectations, and higher macroeconomic uncertainty on a global level.
Gold and silver ETFs include:
- iShares MSCI Silver Trust (NYSEArca: SLV)
- ETFS Physical Silver Shares Trust (NYSEArca: SIVR)
- PowerShares DB Silver Fund (NYSEArca: DBS)
- SPDR Gold Shares ETF (NYSEArca: GLD)
- iShares COMEX Gold Trsut ETF (NYSEArca: IAU)
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD and SLV.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.