Silver Outshines as Markets Fall
On Friday, silver traded as an industrial metal and fell with the stock market. However, today it clearly traded as a precious metal and more than made up for its earlier decline. While gold was up 1%, silver was up over 4.5%.
Anyone trading gold for silver Monday morning as I had suggested over the weekend would definitely be please. The gold to silver ratio moved back down from 70 to 68. The ratio remains far from the historical ratio of 15 to 1, but its not bad for a one day move. While I do expect the ratio to revert to historical norms, there is no indication that it will happen anytime soon. In order for that to happen the perception of silver will have to change to a store of value first, and industrial metal second. Ironically, it is the use of silver as an industrial metal that will make this transition so severe when it finally occurs.
In the meantime, traders may look to play the range of the gold and silver ratio by opening pair trades near 70, and closing or reversing them near 60.