Industrial demand for silver dipped 0.5% last year on lower demand from Europe and North America. On the other hand, gold has been buoyed this year by accomodative interest policies throughout the developed world. That includes the Federal Reserve, which has been reluctant to raise interest rates with few traders betting that is going to happen at the Fed’s April meeting.
Still, the gold/silver ratio is worth listening to and some market observers believe the ratio is sounding a potentially ominous tone for other assets.
“One might argue that the gold-silver ratio could go up, but the point is that the correlation is already at an extreme. If the two assets close the gap and return to normal, deflation could increase dramatically,” according to Hard Assets Alliance.
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Tom Lydon’s clients own shares of GLD.