UNITED STATES May 09 2017 2:35 PM
NEW YORK (Scrap Register): The gold/silver ratio should stabilize after recently higher levels, and there is potential for silver to bounce for a while even if gold doesn’t, said Citi in a snippet.
Analysts pointed out that the gold/silver ratio hit its highs for the year to date last week at around 75.5. This measures how many ounces of silver it takes to buy an ounce of gold. A higher number means under performance by silver, and vice-versa.
“The gold/silver ratio is likely to persist above the current YTD average of 70.3 [times], given ample room for silver money manager liquidation on Comex,” Citi noted.
“That said, the majority of the move lower in silver spot prices has likely taken place for this quarter and trading is unlikely to fall much below $16/oz; the 14-day RSI [Relative Strength Index] level has crashed below the oversold threshold to 19%,” Citi added.
“We therefore do not expect the gold/silver ratio to continue rallying too far from current levels and also see some downside risks for gold prices into June,” they continued.
The bank said it expects the gold/silver ratio to average above 70 this year, which would be 10 to 12 points above the long-term mean. Relatively low gold-silver price correlations support our view for a modest rebound in silver prices from here even if gold prices struggle into a June FOMC [Federal Open Market Committee] meeting.
“Over the past five years, the longest consecutive period of opposing price trajectory between gold and silver lasted about four days and occurred between the 25th and 30th October 2013,” Citi noted.