Is This Ratio Signalling More Trouble Ahead?

• Posted by Robert Sinn
• on June 22nd, 2012

The gold ($GC_F $GLD)/silver ($SI_F $SLV) ratio has always been an important chart to keep an eye on, at least in terms of its overall trend. After an historic downtrend in the ratio between August 2010 – April 2011 the gold/silver ratio has nearly doubled from its April 2011 low and continues to flirt with major resistance at 60:

Click to enlarge

What would a breakout above 60 mean for the broader market and investors’ overall risk appetite? In all likelihood it would mean at least one of the following (perhaps the first and last bullet points are the most important):

• Deflationary forces have continued to grow stronger
• Investors have a growing perception that global central banks have “run out of ammo”
• Industrial demand for silver continues to weaken along with silver’s role as an investment asset
• A continued deterioration in investors overall risk appetite

 

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