Gold/Silver Ratio Suggests Great Buypoint? 4 ETFs to Watch
Silver, gold stocks had a big rally last week. In recent 5 trading days, the gold and silver industry rose 7.36%, 6.89% respectively.
$Gold - main 2304(GCmain)$ is trading at a level close to its six-week high, due to the rising demand for safe-haven assets.
Data source: Tiger Trade, as of Mar 20 2023
The market favoring the gold and silver again, which is undoubtedly related to last week, and even last week's several different banks exposed liquidity risks. In addition, the Fed's interest rate hike expectations have cooled, then the market's risk aversion soared.
In terms of individual stocks, 9 stocks including$Endeavour Silver(EXK)$ ,$First Majestic Silver(AG)$ , $Silvercorp Metals Inc(SVM)$ ,$Hecla Mining(HL)$ , $Pan American Silver(PAAS)$ ,$Gatos Silver, Inc.(GATO)$ , $MAG Silver(MAG)$ ,$Fortuna Silver Mines(FSM)$ , and$New Pacific Metals Corp.(NEWP)$ rose in the past week, even on Monday.
Data source: Tiger Trade, as of Mar 20 2023
You may ask:
is it too late to pay attention to investment opportunities in gold and silver?
Is the rally in related opportunities sustainable?
Any good opportunities to get involved?
In this article will focus on sharing an important and rare signal indicator and some suitable ETFs.
1. 3 Q&A on Gold/Silver Ratio
What is gold/silver ratio
The gold/silver ratio indicates the amount of silver that an ounce of gold can buy, the ratio obtained by dividing the gold price by the silver price.
In the past few decades, the average value of gold/silver ratio is around 60, generally higher than or close to 80, indicating that silver is undervalued.
source：www.chards.co.uk
How the Gold/Silver Ratio Moves
- If Gold’s price increases by a greater percentage than the price of Silver, the Ratio increases.
- If Gold’s price decreases by a smaller percentage than the price of Silver, the Ratio increases.
- If Gold’s price increases and the price of Silver declines, the Ratio increases.
- If Gold’s price decreases by a greater percentage than the price of Silver, the Ratio decreases.
- If Gold’s price increases by a smaller percentage than the price of Silver, the Ratio decreases.
- If Gold’s price decreases and the price of Silver increases, the Ratio will decrease.
Which Factors Influence the Gold-to-Silver Ratio?
On the surface, the Gold/Silver Ratio is affected by the changes in the prices of Gold and Silver. Then the S&P 500 Index and the Gold/Silver Ratio are inversely correlated, what's more economic sentiment is a significant driver of the Gold/Silver Ratio’s value. When the Ratio is high, economic sentiment is poor and vice versa.
2. How to Play Gold/Silver Ratio in Trading
The gold/silver ratio has important reference significance for mastering the buying and selling nodes when investing in precious metals:
Historically speaking, The ratio is most useful at its extremes. When the ratio topped eighty, it signaled a time when silver was relatively inexpensive in relation to gold.Silver went on to rally 40%, 300%, and 400% the last three times this happened.
10 yr Gold Silver Ratio, Source:Schiffgold.com
The above chart is a 10-year historical look at the gold-to-silver ratio. Many analysts believe a move over eighty is bullish for silver.
What's more importantly is that the gold/silver ratio has never stayed above 80 for long, and the gold/silver ratio has been at or above 80 three times since 1995, with an average of 47 for those days.
Opportunities for investors to buy silver at undervalued prices relative to gold are also limited and often fleeting.Silver$Silver - main 2305(SImain)$ is similar to gold for now. It has not retested its January high which means the up move has not been as dramatic, which requires less need for consolidation.Technically，Silver looks far less overbought, currently stand on the 50-dayDMA, but still below the 20-day SMA.
3. Factors affecting silver prices and ETFs to Focus
In addition to the safe-haven properties of precious metals, silver price has a greater impact from industrial demand than gold.
According to Silver Institute report, silver industrial offtake is expected strengthen further by 2.6% y/y to 550 million ounces (Moz) in 2023, silver industrial demand projected to achieve a new record high in 2023.
The total demand In 2023 is forecast to dip to 1.15 Boz, a fell from 1.24 billion ounces (Boz) of 2022, however, even at that level, it will still be the second-highest global silver demand level on record.
However, economic and geopolitical factors, including persistent tight U.S. monetary policy and the Russian-Ukraine war, could pose challenges for the entire precious metals complex, including silver. Investors now are looking ahead to the Fed’s policy decision on Wednesday.
Below are 4 Silver ETFs may benefit as silver prices soar：(as of March 20 2023)
| ETF Name | Natural Resource | Total Assets ($MM) | YTD 2023 | Previous Closing Price | 1-Day Change |
| $iShares Silver Trust(SLV)$ | Precious Metals | $10,107.90 | -6.31% | $20.63 | 3.56% |
| $Aberdeen Standard Physical Silver Shares ETF(SIVR)$ | Precious Metals | $1,005.60 | -6.35% | $21.52 | 3.31% |
| $ProShares Ultra Silver(AGQ)$ | Precious Metals | $344.20 | -14.88% | $27.24 | 7.12% |
| $Sprott Physical Silver Trust(PSLV)$ | Precious Metals | $0.00 | -6.31% | $7.72 | 4.18% |
Which ETF do you bulish the most? Why? Please leave your comment below.
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