Gold and silver ratio has dropped over 10.4% as silver plays catch up

  • Gold prices are strong, but silver is stealing the show.
  • Gold and silver ration plummets are investors buy into solvers safe-haven appeal. 

Spot gold prices have petered out in the US session and have been capped at $1,546.90, a touch below the start of the week's highs for 2019 at $1,555.33. The price has moved into a consolidation following a surge in gold during the European markets with the bond yields in the red, underlining concerns over Italy, Brexit, the European banking sector and signs of while the U.S.- China trade war remains a clear risk to global growth. 

The US session, however, was more positive and stocks surged with the three major U.S. stock market indexes in the green despite the bond market that has continued to flash warnings of a recession due in part to the ongoing U.S.-China trade tensions, Brexit and various global economic data disappointments - The 10-year Treasury note slipped a further 2.8 basis points to 1.4568% after ending at its lowest since 2016 on Tuesday  - We are now just a spike away from the all-time low near 1.36%. 

Gold futures bleed out

By midday, the Dow Jones Industrial Average rose 193 points or 0.8%. The S&P 500 gained 0.6%, and the Nasdaq Composite was up 0.3%. Subsequently, gold futures turned lower on Wednesday, after the sharp rally in the past month to the highest levels since 2013- For  December delivery, on Comex, the price of the safe-haven metal fell $2.70, or 0.2%, to settle at $1,549.10 an ounce. This follows a settlement at $1,551.80 on Tuesday, which was the highest finish for a most-active contract since April 2013.

Silver stealing the show

As for its sister metal, silver, prices on a spot basis have been rallying to as high as $18.50, a full 1% positive on the day, having travelled from a low of $18.07. This move sent the gold and silver ratio tumbling to below 84, (83.54 was the low), as silver plays catch up with its peer and investors buy-in at a discount compared to gold, buying onto its safe-haven qualities during these times of uncertainty and high volatility in markets - The gold and silver ratio now stands at over 10.4% lower than its peak in May earlier this year.  September silver added 16.5 cents, or 0.9%, to $18.318 an ounce while the more actively-traded December silver contract put on 15.8 cents, or 0.9%, to end at $18.456 which was the highest finish for a most-active contract since April 2017.

Gold levels 

While through and holding above the 1,520-1,525 zone, bulls are looking to test a break of 1,558 to open 1,590, the 127.2% Fibo target area. The long game is towards the Oct 2012 highs at 1795. On the downside, should there be some fundamental switch-up, bears can target a 23.6% retracement to 1472 ahead of a 50% mean reversion to 1401. 

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