Gold to Silver ratio analysis: Mean reversion trade
|Historically High Ratio, The Gold to Silver Ratio is currently at historically elevated levels (current data point at 83), meaning it takes 83 ounces of silver to buy one ounce of gold.
This suggests that, relative to gold, silver is undervalued when compared to its long-term average (which typically falls closer to 60-70).
If the ratio successfully reverts from 83 to a target of 70, this provides a clear upside scenario for silver.
That's why silver is very cheap compared to Gold.
Assuming a current gold price (e.g., $4,000) remains constant, the projected silver price would be calculated as 4000 / 70 57 $ per Silver ounce.
This illustrates the substantial upside potential for silver when the mean- reversion trade plays out.
Silver as a metal has two sources of demand, industrial source and monetary source as well.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.