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Business/Finance See other Business/Finance Articles Title: Where’s the Bottom? Here’s a ‘Magic Number’ Worth Watching Where’s the Bottom? Here’s a ‘Magic Number’ Worth Watching The most frequently asked question right now is…”Where’s the bottom?” Anyone looking for the bottom might want to pay some attention to a thing called the Gold/Silver Ratio (GSR). Simply put, this ‘magic number’ is just the number of ounces of silver it takes to buy one ounce of gold. Over the past 20 years, the GSR has been a pretty steady indicator of a turn in the market. Consider the following chart depicting the gold to silver ratio over the past 20 years. GoldSilver Ratio Updated F In the past 2 decades, gold was over 80 times more expensive than silver only three times. In every case, within about a year, the gold to silver ratio corrected downward by 40% to 60%... because silver outpaced gold as they both moved higher from that point. You see, silver follows gold once gold starts moving down in price. Then, it typically outpaces gold to the downside because it is a thinner, more volatile market. We tend to see the same thing in reverse on moves upward in price as well. Gold starts moving up, and silver follows. More often than not, silver overtakes gold as they both move higher. Given all of the above, it seems we are very close to an opportunity in gold and silver. What should you do when the ‘Magic Number’ hits 80? Here are three options to consider: Insurance – If your overriding objective is to buy precious metals for insurance, consider buying some insurance – gold . Your premium may not be cheaper for your insurance policy for another 6-7 years. Speculation – Considering the volatile nature of silver, with wider swings to the downside followed by wider swings to the upside, profit-motivated precious metals buyers may consider purchasing some silver. Trading – Historically, this is the most common use of the GSR indicator. Traders will look to the height of the GSR – near this ‘magic number’ of 80 – to sell some gold and buy some silver with the proceeds. Then, when the GSR hits new lows, they sell the silver and buy back gold. Regardless of your motivation, the GSR is a ‘magic number’ worth watching. If the pattern holds up, it may be one of the best signals of a bottom we have seen in the past two decades. Poster Comment: They are selling gold and silver Eagles. Post Comment Private Reply Ignore Thread
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