How To Invest In Gold Now – Buying And Selling Gold, Coins, Bars, Shares, Mining, ETFs

The previous time the gold silver ratio stood below 40:1 was in February 1998, just after silver had staged a 33% rally in five weeks, whilst gold had gained just 4% over the exact same period (which commenced at the start of the year). The contraction within the ratio over the period was from 48.4:1 to 38.1:1.

This time, some thirteen years on, the gold Silver Prices ratio is trading at between 39:1 and 40:1 and a similar contraction has taken precisely the exact same length of time. This time however, gold and silver are trading at over $1,440 and $36, whilst back in 1998 they were at $300 and just over $7.

This time the Silver Prices have bounded up as a result of a sustained belief (whether or not right or wrong) in gold’s upside on the back of prevailing geopolitical and inflationary worries. Both gold and silver are already in sustained bull markets, whilst in 1998 the change in ratio marked the start of a shift in sentiment, even though one that was buffeted by subsequent external events.

Silver investment can frequently exceed that of gold for more than just one single reason: a) the history of silver’s higher volatility over gold, prompting professional activity having a view to gearing up on returns; b) silver’s lower unit price, which draws in some smaller-scale investors who want exposure to precious metals because of inflationary fears in particular and who don’t necessarily have enough wealth to invest in gold to any meaningful level; c) within the United States in particular, silver has a long-standing investment tradition. This is because of the period when the US dollar was on the gold standard and private people were prevented from holding gold, so they used silver as a substitute.

At the start of 1998, gold was starting to stage a recovery after a long period of uncertainty, portrayed by intermittent announcements of large-scale central bank sales that unsettled marketplace sentiment; this was augmented by increasingly heavy mine hedging as well as these two fundamental elements, combined with anti-inflationary monetary policy, had kept gold prices under certain pressure.

What was unique about the start of 1998 was the putative formation of the European Monetary Union, which gave the markets a degree of comfort and decreased the expectation of official sector sales. (This, of course, was latterly to be stymied by the headline in May 1999 by HM Treasury in the UK of the planned disposal of up to 40% of UK gold holdings; sentiment then changed considerably as a result of the institution of the very first Central Bank Gold Agreement in September 1999). Investors started to return to gold and silver was a natural beneficiary of the changes in sentiment.

Interestingly enough, silver manufacturing demand in 1988 was just over 26,000 tonnes; in 2010 it was extremely close to the exact same level, suggesting that the marketplace itself is not much deeper than it was within the late 1980s. In fact, on the basis of LBMA clearing figures, the December 2010 daily average clearing pace was just below 100 million ounces, less than one-third of the clearing numbers for end-1997.

The structure of the demand side has transformed with industrial demand from customers fluctuating, but photography, jewelry, and silverware falling considerably. Coin demand from customers, by contrast, continues to be growing steadily.

Sustained retail demand has made it easier for the rise in the price of silver in recent months, highlighting the continued awareness at the retail level of the affordability of silver by comparison with gold. This has been especially marked within the Far East, where silver bullion bars have scarce as well as commanding high premiums, whilst India and the Middle East have also been powerful buyers.

As a result the ratio has to some degree taken on a life of its own and been traded as an outright entity within the bullion markets. Today at 13-year lows it is not in unknown territory, but is certainly oversold.

While the markets remain bullish about the outlook for gold on the back of sustained inflationary as well as geopolitical fears, silver is most likely to continue to attract attention. The outright price might make silver unappealing for fresh bull positions, but theoretically driven and momentum trades might yet see costs higher if the political scenario is not resolved having a minimum of further trauma. Silver has often been the leader between the two precious metals because of its lower unit price and higher volatility; the ratio can therefore be regarded as a similar leading indicator. In fact it is most likely one of the most significant indicators in terms of precious metals marketplace sentiment and, so, when it comes to searching for guidance, the chart should be watched closely for signs of change. Actually stabilization could be significant; a bounce may well trigger stops. I recommend you buy silver dollar coins and put them away safely for the time coming soon when you may need them.