Gold to silver ratio drops below 100-day SMA, eyes fresh 2.5-month lows


  • Gold to silver ratio drops below the 100-day simple moving average (SMA).
  • Ratio's violation of key support suggests silver is likely to continue outperforming gold in the near-term.
  • The macroeconomic picture favors stronger gains in both gold and silver. 

Gold to silver ratio, which indicates how much silver can be bought for one ounce of gold, has declined below its 100-day simple moving average (SMA) of 101.24, and could soon set fresh 2.5-month lows under the May 20 low of 99.50. 

The ratio hit a high of 126.56 on March 18 and has been falling ever since. It has declined from 115.35 to 100.00 in the last three weeks, courtesy of the sharp rise in Silver. 

The white metal picked up a strong bid below $15 on May 7 and rose to a high of $17.63 on May 20. Gold, too, witnessed a rally from $1,680 to $1,765 during that time frame. However, in percentage terms, silver rallied 17.5%, outshining gold's 5% gain by a big margin and pushing the gold to silver ratio lower.

Looking forward, both precious metals could continue to benefit from the escalating US-China tensions and the global economic pain brought on by the coronavirus pandemic. Optimism over easing of lockdowns across major nations could provide an additional boost to silver, a semi-precious metal/semi-industrial metal. The gold to silver ratio's decline below the widely-tracked 100-day SMA is also echoing similar sentiments. 

Gold is currently trading at $1,732 per ounce, representing a 0.3% gain on the day. Meanwhile, silver is trading at $17.37, up 1.8% on the day. 

Gold technical levels

    1. R3 1748.71
    2. R2 1742.37
    3. R1 1734.58
  1. PP 1728.24
    1. S1 1720.45
    2. S2 1714.11
    3. S3 1706.32

Silver technical levels

    1. R3 17.56
    2. R2 17.39
    3. R1 17.23
  1. PP 17.07
    1. S1 16.91
    2. S2 16.74
    3. S3 16.58

 

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