Silver Traders Should Stay Focused On Gold/Silver Ratio

Gold markets have recently tested historic highs, but silver failed to gain sufficient upside momentum and did not manage to get to the test of the highs that were reached back in May.

The fluctuations of gold/silver ratio served as the key catalyst for recent weakness in silver markets. At the end of May, gold/silver ratio reached a low of 72.74 and then stabilized near the 77.50 level. In recent days, gold/silver ratio gained strong upside momentum and moved above the 82 level, which was bearish for silver markets.

What’s driving gold silver ratio? At this point, silver markets are mostly driven by speculators, as industrial demand is stable. Unlike gold, silver does not enjoy support from central banks, which means that silver markets must attract speculative investors to make a strong move.

As a result, silver traders are closely watching dynamics of gold markets and start buying silver when gold is moving higher. If these traders believe that gold is about to face resistance, they sell silver. This type of behaviour causes wild fluctuations of gold/silver ratio, which serves as a key indicator for silver traders.

This year, gold/silver ratio was moving between the highs at 92.10, which were reached in January, and the above-mentioned lows at 72.74. Gold/silver ratio has recently moved above the strong resistance near the 80 level and continues to move higher, putting additional pressure on silver markets.

In case gold markets continue to move away from historic highs, silver may find itself under more pressure, as gold/silver ratio could move closer to yearly highs.

When demand for gold starts rising again, silver could outperform as gold/silver ratio will likely decline. In this scenario, speculative traders would rush to buy the relatively cheap silver to capitalize on the upside moves in gold markets. Thus, watching gold/silver ratio dynamics is extremely important for success in silver trading in 2024.

For a look at all of today’s economic events, check out our economic calendar.