Pls see chart below for Gold/Silver ratio.
It seems to be an interesting indicator.
Rationale -
Silver is more speculative than Gold in general
It is kind of a high beta version of Gold in one way
When speculation is rampant - credit and money is easy - Silver tends to rise much more than Gold
Gold is viewed as a safe haven etc as well so it is less speculative
When conditions are tight , ie mkts crash or during recessions or when risk assets fall - Silver tends to fall much more than Gold
So in good times - Silver will outperform Gold and in times of stress , the other way around - Gold will outperform Silver
The ratio on the chart is a simple - Gold / Silver ratio
Pls see chart above
I have plotted this ratio vs SPX
It can be clearly seen that it has a -ve correlation to SPX
This is a natural way to hedge risky asset trades
This ratio will move UP in tough times like 2008, 2000 to 2002, 1998 etc
It can be seen that this ratio has just touched the 1998 value.
It may bounce from here or may be not.
Keep an eye on this one as any sustained bounce from here means that SPX could be in trouble.
In my personal opinion, we are close to a top in SPX , may be Gold and Silver.
So SPX should fall and this ratio RISE.
Silver will fall much more than Gold like it did in 2008.
It seems to be an interesting indicator.
Rationale -
Silver is more speculative than Gold in general
It is kind of a high beta version of Gold in one way
When speculation is rampant - credit and money is easy - Silver tends to rise much more than Gold
Gold is viewed as a safe haven etc as well so it is less speculative
When conditions are tight , ie mkts crash or during recessions or when risk assets fall - Silver tends to fall much more than Gold
So in good times - Silver will outperform Gold and in times of stress , the other way around - Gold will outperform Silver
The ratio on the chart is a simple - Gold / Silver ratio
Pls see chart above
I have plotted this ratio vs SPX
It can be clearly seen that it has a -ve correlation to SPX
This is a natural way to hedge risky asset trades
This ratio will move UP in tough times like 2008, 2000 to 2002, 1998 etc
It can be seen that this ratio has just touched the 1998 value.
It may bounce from here or may be not.
Keep an eye on this one as any sustained bounce from here means that SPX could be in trouble.
In my personal opinion, we are close to a top in SPX , may be Gold and Silver.
So SPX should fall and this ratio RISE.
Silver will fall much more than Gold like it did in 2008.
No comments:
Post a Comment