Gold is doomed by a declining Gold-to-Silver-Ratio

L

leon1998

Member
10-year chart showed that GSR (Gold-to-Silver-Ratio) has peaked; and trending DOWN.

Last few months have seen worrisome price movement:
When GSR drops, Silver held up and Gold crashed;
When GSR bounces, Silver crashed and Gold held up.

In summary, gold and silver took turns to plunge, while GSR stepped down month after month. Can't imagine what if GSR drops to below 40.
 
I would go half-in silver, and use the rest half to short gold.

When GSR hits 40, switch silver to gold AND short silver.

There is money to be made. :lol:

clear said:
Leo, go all-in silver now and when GSR hits 40 switch for 1.75oz gold.
Click to expand...
 
i wonder what percentage of Australia Post parcels contain physical silver?

So far they are the only winners I know of from trading silver.
 
swoydaz said:
i wonder what percentage of Australia Post parcels contain physical silver?

So far they are the only winners I know of from trading silver.
Click to expand...

You think there is a more than ten million physical ounces traded in a year?
 
leon1998 said:
10-year chart showed that GSR (Gold-to-Silver-Ratio) has peaked; and trending DOWN.

Last few months have seen worrisome price movement:
When GSR drops, Silver held up and Gold crashed;
When GSR bounces, Silver crashed and Gold held up.

In summary, gold and silver took turns to plunge, while GSR stepped down month after month. Can't imagine what if GSR drops to below 40.
Click to expand...

Leo, GSR widening a bit when do you think it will come down to 40.
 
clear said:
leon1998 said:
10-year chart showed that GSR (Gold-to-Silver-Ratio) has peaked; and trending DOWN.

Last few months have seen worrisome price movement:
When GSR drops, Silver held up and Gold crashed;
When GSR bounces, Silver crashed and Gold held up.

In summary, gold and silver took turns to plunge, while GSR stepped down month after month. Can't imagine what if GSR drops to below 40.
Click to expand...

Leo, GSR widening a bit when do you think it will come down to 40.
Click to expand...



Since the early 1980s, the GSR has never even traded below about 45 or so except for the brief period of time that silver went up around $50 USD per ounce in 2011. I highly doubt it will ever hit 40 without an exponential rise silver. I do think that both metals will decline materially from here. As for the GSR, considering the much wider spread in silver vs. gold, it's a wonder that people even bother bringing this strategy up as an investment thesis. However, if you're trading etfs it might make some sense. Except for that the short side of any etf trade will be an expensive one (from an interest or options/futures decay perspective).

Also, I wouldn't be all that surprised if gold were to get to a 100 to 1 ratio and stay there if a fundamental long term preference of stackers takes hold as a permanent preference. Silver is arguable not even a "precious metal" in the eyes of most people. An ounce is usually good for a decent cheaper lunch and that's about it. On a longer term basis, probably beyond our lifetimes, I wouldn't be surprised if the GSR came down to 10 or 20 or even 5 to 1 because gold somehow loses any sense of real value in the mind of the public considering it has zero functional purpose. I say that with the caveat that it is a wonderful metal with a wide array of actual purpose except there isn't anywhere near enough of it to use as a functional anything.
 
FSF said:
Also, I wouldn't be all that surprised if gold were to get to a 100 to 1 ratio and stay there if a fundamental long term preference of stackers takes hold as a permanent preference. Silver is arguable not even a "precious metal" in the eyes of most people. An ounce is usually good for a decent cheaper lunch and that's about it. On a longer term basis, probably beyond our lifetimes, I wouldn't be surprised if the GSR came down to 10 or 20 or even 5 to 1 because gold somehow loses any sense of real value in the mind of the public considering it has zero functional purpose. I say that with the caveat that it is a wonderful metal with a wide array of actual purpose except there isn't anywhere near enough of it to use as a functional anything.
Click to expand...
I wouldn't be surprised if angels cover the sky when heaven felt from it.
Central banks seriously decreased their gold purchases this year, 3quarters data sum only 270 tonnes, while previous years were like double a 25% extrapolated year total.
year / tonnes (multiple values = later updates, for ex 2013 ended 2 years later up 625 instead of 387)
(positive = sold, negative = purchased)
2005 663
2006 365
2007 484
2008 235
2009 34
>>> 5592 tonnes gold sold over the period 1997-2009
2010 -77
2011 -455
2012 -544.1
2013 -386.6(2014Q1) > -409.3(2014Q2) > -625.5 (2015Q1)
2014 -477.2(2014Q4) > -588.0(2015Q1) > -590.5 (2015Q2) > -583.9 (2015Q4)
2015 -588.4 (2015Q4) > -566.3 (2016Q1)
2016Q1-3 -271.11

http://www.gold.org/download/file/5283/GDT_Q3_16_Tables.xls
In a year to year Q1-3 comparison total bar and coin demand dropped 36% and central bank demand 51%. ETFs started 2016 big time and for a change in recent years, bought instead of sold. Nevertheless, since 2011 they sold half of what they accumulated since they came into existence (2003).
So your "stackers permanent preference" appears to me like angels in the sky ...
And oh well, buying cheaper lunches, that's what I do every day all year hence I opted for silver small change, albeit at a too big price tag.

Considering silvers current hedge, things don't look that different from mid last year so probably again a $14-15 bottom. A (temporary because sold out = sold out and they didn't buy more since years) game changer would be ETF's selling like they gold equivalents did in 2013 or so.
 
GSR assumes a relationship which is not set in stone. Using it as a gauge for future gold price movement is foolhardy.
 
FSF said:
clear said:
leon1998 said:
10-year chart showed that GSR (Gold-to-Silver-Ratio) has peaked; and trending DOWN.

Last few months have seen worrisome price movement:
When GSR drops, Silver held up and Gold crashed;
When GSR bounces, Silver crashed and Gold held up.

In summary, gold and silver took turns to plunge, while GSR stepped down month after month. Can't imagine what if GSR drops to below 40.
Click to expand...

Leo, GSR widening a bit when do you think it will come down to 40.
Click to expand...



Since the early 1980s, the GSR has never even traded below about 45 or so except for the brief period of time that silver went up around $50 USD per ounce in 2011. I highly doubt it will ever hit 40 without an exponential rise silver. I do think that both metals will decline materially from here. As for the GSR, considering the much wider spread in silver vs. gold, it's a wonder that people even bother bringing this strategy up as an investment thesis. However, if you're trading etfs it might make some sense. Except for that the short side of any etf trade will be an expensive one (from an interest or options/futures decay perspective).

Also, I wouldn't be all that surprised if gold were to get to a 100 to 1 ratio and stay there if a fundamental long term preference of stackers takes hold as a permanent preference. Silver is arguable not even a "precious metal" in the eyes of most people. An ounce is usually good for a decent cheaper lunch and that's about it. On a longer term basis, probably beyond our lifetimes, I wouldn't be surprised if the GSR came down to 10 or 20 or even 5 to 1 because gold somehow loses any sense of real value in the mind of the public considering it has zero functional purpose. I say that with the caveat that it is a wonderful metal with a wide array of actual purpose except there isn't anywhere near enough of it to use as a functional anything.
Click to expand...
excellent...
 
tolly_67 said:
GSR assumes a relationship which is not set in stone. Using it as a gauge for future gold price movement is foolhardy.
Click to expand...
There is some relation between both markets, due to GSR based traders, mainly they use silver on a road to more gold, silvers market tends to contain more suckers, easier to milk, and the freebies chewed out there, then are used to add gold.
So it's indeed not a stone relationship, but still a relationship.
What the price impact is of this part of the silver trading, is an open question.
I think it's substantial, based on the presence of quite some sequences silver price peak > gold price peak in the historical price trends.
Also, governments tend to lure people away from silver to gold (by selectively buying the latter), which also brings in gsr relevance.
That is what they say themselves, they "support" gold.
Of course, only at times when it serves their anti speculation war position. :)
 
I don't see much data indicating a lower gold bottom than the $1100 of 1 year ago.
Most of this 1 year upspike was due to ETF's (SPDR, IShares, Sprott, ...) and futures (a 20 years recordhigh total net position of 360K, previous peak 300K in 2009 - the price impact of 1120 tonnes bogus gold demand)
ETF's 340 tonnes during 2016Q1, 237 tonnes Q2, 146 tonnes Q3, totaling 723 tonnes 2016Q1-3
So as it looks like, nothing really much changed in the stackers market.
Of course, if the gold ETF's would start to sell to a further low (at the bottom they still had half of what they bought since they came into existence), golds price would end up at $900 or so.
 
so far, GSR has been bouncing between 68 and 73.

And it seems trending down again, even if silver can retest 17, gold will still be capped below 1160 if GSR goes to 68, too.

I am considering to double down my GLD short once that 1160 is tested.
 
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