Why is Silver Rallying as Compared to Gold Movement?

Have you ever wondered why is silver rallying? This post is a must-read to understand the logic behind the movement in the Silver prices.

Unlike gold, that is purely a safe haven and store of value, silver is better known for industrial applications in electronics, medicines and solar panels.These account for more than 50% of silver demand.

But, according to the Silver Institute, the demand for silver bars as an investment has been increasing since 2018.

Now we will let the cat out of the bag as the real explanation to the silver rally comes from the Gold/Silver Ratio.

What is the Gold/Silver Ratio? The gold/silver ratio is simply the amount of silver it takes to purchase one ounce of gold. If the ratio is 25 to 1, that means, at the current price, you could use 25 ounces of silver to buy one ounce of gold.

The Gold/Silver ratio is the ratio of the price of 1 Oz of gold to 1 Oz of silver. (Here Oz represents 1 troy ounce = 31.103 grams) When the Gold/Silver ratio touched 120 in March 2020, it was not only the highest level in the last five years but the highest in the last 100 years since the prices of silver of gold and silver have been regularly recorded.

Historically, when the Gold/Silver prices get above 80, it was a signal to either sell gold or buy silver. In this case, since gold continued its safe haven rally, the bigger rally came from silver to bring the ratio down from 120 back to 80 levels. That probably explains why silver ended up being the top-performing precious metal in the last one year.

Hope it answers the query that why Silver has outperformed gold in the past few days.

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