My take on the ASX, HUI, XAU ratios as indicators.

H

Henry Wartooth

New Member
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I'm not a trader but I'm a sucker for stats, so I've added some common PM ratios to my spreadsheet to watch for curiosity's sake as time goes on.

This is how I understand things from my plebeian perspective...

Gold/Silver ratio
=Silver ounces it takes to buy one ounce of gold. A ratio of +50 indicates that silver considerably undervalued compared to gold. 1:16 is allegedly the natural ratio bestowed since time immemorial. As the ratio closes, so too does the window of cheap silver and high returns.

Dow/Silver
= Silver ounces it takes to buy a share of the Dow. If it drops below 100, you're going to want to think about using some of that silver to buy stocks...because you are now a Precious Metal Tycoon. I know the Dow/Gold ratio is also popular, but I don't know enough about it. Can anyone chime in on this? I'd assume a dropping ratio would indicate people abandoning the US stock market for the safe haven of gold.

ASX/Gold
= Gold ounces it takes to buy a share of the All Ords. I'm not sure about historical benchmarks -all I know is that a falling ratio should indicate a generally slowing AU economy and more expensive gold Down Under.

HUI/Gold and XAU/Gold
= Performance of gold vs. the gold mining sector. This is where I'm not so sure of things. As I understand it, the HUI -as an index- is more indicative of near term production output compared to the XAU. Higher ratios should mean money is flowing into the gold mining sector to meet demand for precious metals. Falling ratios should indicate falling profitability due to increasing expense and/or lower output (i.e. it's costing them more to find less). I would imagine these two indicators should decline over the long term as the availability of natural deposits dries up.

SO THERE YOU GO!!! How'd I do? Anyone have any corrections or opinions to add? What other ratios are fun to look at? Oil/Gold?
 
I've been curios about silver / oil, I suspect there would be a pretty close corelation there.
Also gold / average house in your area - that is going to the indicator I use when the time comes to cash in.
 
GBN.. Silver/Oil...Would have to be around the 3 /1 wouldn't it.

Silver around $30/ oil around $90 a barrel

Regards Errol 43

edited for spelling
 
errol43 said:
GBN.. Silver/Oil...Would have to be around the 3 /1 wouldn't it.

Silver around $30/ oil around $90 a barrel

Regards Errol 43

edited for spelling
Click to expand...

In the early 80s, it was around 1:1 at one point :o

Markets are crazy things.
 
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