Silver Outperforms Gold For Bigger Returns - Why It Is Time To Buy Silver Now!

March 16, 2011 - PRLog -- The gold silver ratio is an essential indicator of rising silver prices. The previous time the gold silver ratio stood below 40:1 was in February 1998, just right after silver had staged a 33% rally in five weeks, whilst gold had gained just 4% over the same period (which commenced at the beginning of the year). The contraction within the ratio over the period was from 48.4:1 to 38.1:1. Visit http://silver-dollar-values.com

This time, some thirteen years on, the gold silver price ratio is trading at between 39:1 and 40:1 and a comparable contraction has taken exactly 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 had been at $300 and just over $7.

Now the silver price has bounded up as a result of a continual belief (whether or not right or wrong) in gold's upside on the back of prevailing geopolitical and inflationary concerns. Both gold and silver are already in sustained bull markets, while in 1998 the transformation in ratio marked the start of a shift in sentiment, albeit one that was buffeted by subsequent external events. Visit http://silver-dollar-values.net

Silver investment can often 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 cost, which draws in some smaller-scale investors who want being exposed to precious metals due to inflationary worries in particular and who do not 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. Visit http://silverdollar.cc

At the start of 1998, gold was beginning to stage a recovery following a lengthy period of uncertainty, portrayed by intermittent reports 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 fiscal policy, had kept gold prices under certain pressure.

What was unique about the beginning of 1998 was the putative formation of the European Monetary Union, which gave the marketplaces a degree of comfort and decreased the expectation of official sector sales. (This, of course, was latterly to be stymied by the announcement 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 first Central Bank Gold Agreement in September 1999). Investors began to return to gold and silver was a normal beneficiary of the changes in sentiment.

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

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

Continual retail demand has helped the rise in the price of silver in recent months, highlighting the continued recognition at the retail level of the value of silver by comparison with gold. This has been especially marked in the Far East, where silver bullion bars have scarce as well as commanding high premiums, while India and the Middle East have also been strong buyers.

Consequently the ratio has to some extent taken on a life of its own and been traded as an outright entity in the bullion markets. Now at 13-year lows it's not in unknown territory, but is definitely oversold.

Whilst the markets stay bullish about the prospect for gold on the back of continual inflationary and geopolitical fears, silver is likely to continue to attract attention. The outright cost might make silver unattractive for fresh bull positions, but technically driven and momentum trades may yet see prices greater if the political scenario isn't resolved having a minimum of further trauma. Silver has often been the leader between the two precious metals due to its lower unit price and greater volatility; the ratio can therefore be regarded as a similar leading indicator. In fact it's probably one of the most significant indicators in terms of precious metals market sentiment and, so, when it comes to searching for guidance, the chart ought to be watched closely for signs of change. Even stabilization would be significant; a bounce might well trigger stops.

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