The ounce troy of the precious metal had a solid start to the week, carrying the XAU/USD pair to a fresh monthly high at $1258.73 before it eased back to $1256 area. As of writing, the pair is trading at $1256.70, gaining 0.12%, or $1.5, on the day.
This ratio normally goes well during risk aversion, while it falls off during times of risk-on. If this ratio is about to turn, or at key levels where it could turn, the trader looks to the Equity indices if the risk has indeed been on and if it is about to turn as well.
When the ratio is rising, it means gold is outperforming silver, and when the line is falling, the first term is doing worse, i.e., silver is doing better. In other words, when the ratio is high, the general consensus is that silver is favored. Conversely, a low ratio tends to favor gold and may be a signal it’s a good time to buy the yellow metal. Despite the gold-to-silver ratio fluctuating so wildly, another way of using it is to switch holdings between silver and gold when the ratio swings to historically determined "extremes."
Read more about gold versus silver.
The main indicators that traders should watch to understand where gold is standing are:
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