Are Central Banks the main cause of the high Gold/Silver ratio?
MrEureka
Posts: 24,258 ✭✭✭✭✭
Central Banks seem to like gold and have no respect for silver. If it weren't for their gold purchases, the gold/silver ratio might be dramatically lower. Thoughts?
Andy Lustig
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
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ratio is based strictly on spot prices. central banks don't drive gold price, the futures market does where most buyers and sellers never transfer any physical silver, just promises. Silver is currently a sleeper.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Just like every commodity.
Knowledge is the enemy of fear
The futures markets, as indicated above, dictate the price of PM's. However, some conspiracy advocates indicate, that the banks manipulate the futures market.
There has been evidence....past and recent present.... that manipulation does occur....How much and when is a guess for most of us...IMO, silver is currently undervalued, and, because of it's value in technology, medicine and other areas, I do believe it will, at some point, see a significant increase and hold. Cheers, RickO
Id like to go on record as saying I think the ratio is nonsense and has no significance whatsoever.
I'm not suggesting that Central Banks intend to manipulate the price of gold. I'm only saying that demand from Central Banks moves prices, just like demand from anyone else. And I'm wondering where gold prices would be today without demand from the Central Banks. Just wondering...
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
ricko. Some form of manipulation occurs in all aspects of your life. From the time you are born, to the time you "met your maker." Silver is undervalued do to lack of demand by the forces, ( coin & bullion, industrial & futures ) that dictate the price. It's as simple as that.
I think they intend to manipulate it. Every member of the greater finance industry is crooked so whenever something can be manipulated for a profit it is being manipulated relentlessly.
If the price of gold has significance and the price of silver has significance, then the ratio has significance. Not that that significance is obvious in any way.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Ratio is where it is because of the futures paper market not because of the amount of physical that central banks are purchasing. I always find it funny when everyone is always screaming manipulation when prices go down or stay flat. Never any cries of manipulation when silver was being pumped up to $50.
Perhaps someday the physical market will decouple from the paper market or perhaps maybe not. Do I personally think physical silver is cheap? In relation to the paper debt market you better believe it. Enjoy the gift, stack on.
The whole worlds off its rocker, buy Gold™.
Using the GSR to decide how to invest in metals is right up there with choosing a spouse based on their astrological sign.
Historical relationships can be a very valuable investing tool. Relative value is one of my key tools
Knowledge is the enemy of fear
"Past performance is not an indicator of future outcomes"
I don't worry about ratios. I buy my ASE's and my Pre-33 when I get good prices.
ratios indicate which of the two is the better price.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
That statement has been proven wrong over and over.
A good process is repeatable and predictable.
Knowledge is the enemy of fear
Central banks seem to like status quo, more than gold. Ah, but gold is the next best bet, so it's relative to having greater strength when opportunity presents itself.
Thus, the larger spread with the GSR. I like metal, either way.
The Gold to Silver ratio is one of the tools out there for helping to determine pm price movements. I've tracked it for the past 10 years, and use various time frames and oscillators to help nail it down. Stoch-RSI, CCI are two of them. Sometimes turns with PMs are signaled by GSR shifts. GSR is a fairly well known "liquidity" indicator, somewhat like the Yen/Euro ratio. Liquidity moves help to identify changes in money flow. GSR tends to cycle between 45-65. The extremes of 65-85 and 25-45 are far less traveled. GSR has been in rally mode for almost 8 years. It's chart pattern, TA structures, and cycles are studied by many. CCI extreme peaks in GSR and longish daily cycles of 21-27 days can often support a PM shift right around the corner.
It's also true that GSR seems WAY overdue for a major bottom. The previous 2 major peaks were 7.5 yrs apart...well past the 4-6 yr norm. A GSR major low seems a lot more likely in the foreseeable future than GSR heading to 85-100 for yet another major high. A GSR low by around Jan 2020 would coincide with Armstrong's ECM. GSR has also moved fairly well in step with the USDollar since 2011. The dollar index has been routed from 103 down to 88 recently. Have to wonder what's been keeping the GSR elevated in the 78-81 range for quite some time. 3 thoughts on that. If gold can finally take out $1366 (89 month moving average)....then silver should make a move. Understand that silver is often late to the party during PM rallies. In the 1970's gold out-performed silver the entire decade....up until spring 1979....when silver took off like a rocket on the backs of the Hunts trying to corner physical silver. Silver was 2 years late to join gold during the 2001-2011 rally period. Silver actually was flat while gold rose 53% from 2000-October 2003. The same angles can be debated among GDX/gold and GDXJ/gold. All these ratios tend to be meaningful. Same for GDX/SPY and Gold/SPY.
The 20 yr GSR chart looks quite bullish because of H&S, or cup with handle patterns. 82-83 has been resistance for the past 15-20 yrs. It's coming up to that point again...which could mark a major rule of 4 break out. The chart patterns could send it skying. On the bearish side is the 20 yr - 7 wave expanded wedge in play. Hugely volatile. The projections would be for either massive highs (100+) or massive lows (under 30). To go high, it needs the support of a rallying USDollar index and USD/Yen. To go low it needs the USD/yen and USDX to crash. Review GSR and SGR analysis by chartist/trader/analyst Bob Hoye on some of the public blogs. He's one of the most notable traders who use it....and use it well.
All this just for silver and gold. That's why I don't fool with platinum or palladium.
To answer the original question. Are central banks responsible for the high GSR of 80+? No more than they might have been responsible for the low GSR of 31 back in 2011. While they might be the major influence in the American PM futures markets, they aren't the only player of size. But as in July 2008 when the US central banks were carrying $650 BILL in otc gold derivatives (3-4 yrs equivalent of world gold production) and $200 BILL in otc silver derivatives (13 yrs of world production)....they can heavily over-weight the markets. In 2008 they were largely responsible for moving GSR from around 49 to 70 in only 7 months.
Even if every major silver producer in the world back in 2008 was 100% long silver in their positioning....the US banks were 13X that size on "paper" shorts. It's also cyclically true that high GSRs lead to low ones....and vice versa. Regression to the mean. The 7 year rally in GSR has moved it from 31 into the low 80's. It's been high and low many times in the past 50 years. That's really the only truism....it will cycle between major highs and lows.
https://goldsilver.com/blog/time-to-favor-silver-a-goldsilver-ratio-update/
In the past 50 yrs the ratio has been between 16 and 98 (103 via another source). The ratio has only been higher than current levels about 13% of the time. Using that logic, the odds favor silver by 13X in the foreseeable future.
Caution. The GSR spot chart still has the chart pattern "potential" to rise from the current 81 into the 90's.
More than enough actual, real evidence (and stiff fines) to prove that this is more than a theory. Regulators have repeatedly proven the conspiracy.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The only way I think silver can go up at this point is when enough people hate it to the point no one cares
mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Are we there?
Knowledge is the enemy of fear
No but we're getting close.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire