Black colour is gold and blue colour is silver in this dollars per ounce chart. If you pay attention to the left and right columns, you will see that gold is about 100 times more expensive than silver. You can remember from the previous gold post that the Dow Jones Index was also about 10 times more expensive than gold.
This expression of “expensiveness” does not express the value, but it offers us a comparison opportunity in the long-term perspective. In other words, you can evaluate these "ten" and "a hundred"-fold rates as a midline. When the difference of prices go up, the probability of going down increases, and when the difference of prices go down, the probability of going up increases.
In this context, I extended the previous chart by scaling it logarithmically and starting from 2016 till to 2028. I also added trend lines for both gold and silver. The gap between these two lines can be thought of as the midline. As you can see, when it goes up, the probability of going down increases, and when it goes down, the probability of going up increases. The 2027 year-end targets of $4,000 for Gold and $40 for Silver represent the lowest possible values for these two metals, in my opinion.
So, when the new market prices are occured in the next three years and the gap on the chart is filled, the trend lines will also raise their heads higher. I will try to explain why I think so in the following charts and tables.
But first, let's go back to our first chart. In March 2020, when the pandemic hit very sharply, silver's return fell below gold. Then, in just one year, it rose 2.5 times from bottom to top, reaching $30. Due to this early peak, it could not recover for four years and could not exceed $30.
Both gold and silver started to rise again in September and October 2022 and still continue to maintain this upward momentum today. During this period, gold increased by 66% and silver by 73%. They are 4% and 13% below their peaks, respectively.
But what we need to pay attention to is this: How are they in parallel movement with each other, right? This is not the case for platinum and palladium, for example. Sometimes one sometimes the other jumps, while the other remains stationary.
In this new chart I created logarithmically starting from the beginning of 1990, the rising and falling trends of gold and silver, which are compatible with each other, can again be observed very clearly.
Silver had a slight advantage until the beginning of 2011. Since then, gold's return has come very close to catching up with silver.
Silver's movements are more sharp than gold, meaning it is a more volatile instrument. Gold is relatively more stable.
Our current chart is the Gold/Silver Ratio Chart created since the beginning of 1990. Declines indicate that silver is becoming expensive, and increases indicate that gold is becoming expensive. This is a chart used in the market. It is also compatible with our previous chart. In this previous chart, we saw that gold and silver returns approached each other after 2011. This is the reason for the recent increase from 2011 to 2025, that is shown with the orange arrow in this chart.
Now let's take a closer look to the bottom and top values indicated by the numbers 1 and 2.
I had said that silver becomes expensive when the Gold-Silver Ratio drops to the bottom value indicated by the number 1. The peak value of silver on this date, April 2011, was $49.54. Gold, shown in red on the chart, was around $1450 on that date. In the following process, silver falls to $26.07 in five months. Gold, on the other hand, sees $1920 in the same period, September 2011.
As you see, the Gold-Silver Ratio works well because in five months, silver lost 47% of its value while gold gained 32%.
The number 2 was showing that silver's price has been cheaper. Now we look at this chart. The movement lasted only five months again. Gold actually rised in this range with a significant rate of 46.72%. However, silver climbed like a rocket with a return of 156%. The Gold-Silver Ratio has worked once again.
No comments:
Post a Comment