Loading ...Gold to silver ratio flags credit contraction
In 2008 crash GSR top at 92+. This week GSR has just broken out of weekly diamond. Signaling market will reverse may be????
Bob Hoye: ” GOLD/SILVER RATIO, Nov 25 2008
The gold/silver ratio has been a reliable indicator of credit conditions. It declines during a boom and does its greatest service when it typically signals the credit contraction by increasing. The key move in 2008 occurred with the turn up in May 2007 from 46. This was with the reversal in the credit markets and the technical break out at 54 in August anticipated the fall disaster. Often during the more acute phase of a panic, silver can dramatically plunge relative to gold.
With the break above 54 our target on the full contraction became around 100. That level for the ratio was reached with the banking crisis that ended in late 1990, when the last of the 1980 adventures in crude, gold, silver and real estate were finally written off.
From a high close of 84 on October 28 with that panic the ratio declined to 71 with the stock market rebound to November 5. The next rise with the next panic was to 83.5 on Friday, November 21, and the ratio can decline for a few months as the financial markets recover in the first quarter”
Great chart, I use that one too. I’ve been trying to understand the value of the G/S ratio. It appears that for a new PM Bull, not just gold taking off, we need the ratio to increase a bit more, then perhaps Silver will shine again as it did after 2008.
Silver can be an odd cat, if the economy is declining then there is less need for it in regard to industrial applications, yet gold is getting a bump out of fear. Love silver, but it is second fiddle to gold right now it seems.
This chart shows what an outlier a ratio of 30:1 appears to be, let alone the old monetary ratio of 16:1.
Bob Hoye has been heard on Howestreet, even years ago I am sure, saying that the gold:silver ratio likely will go to 100 again.
Average for the past 25 years has been over 60.
Here is what Bob was talking about with regard to the 100+ ratio in 1991:
http://stockcharts.com/h-sc/ui?s=$GOLD:$SILVER&p=M&yr=45&mn=0&dy=0&id=p84715185119&a=422997387&listNum=1