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Analyzing Gold and Silver Cross-Commodity Rates

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Analyzing Gold and Silver Cross-Commodity Rates PART 1 OF 4

How Is the Gold-Silver Ratio Looking in 2017?

Volatility measures

Most precious metals witnessed a rebound in price on Friday, September 22, 2017, after falling for a few days. Gold rose a marginal 0.31% that day and ended slightly above the previous day’s close of $1,293.30 per ounce. Silver was the winner with a rise of 3.9%, closing at $17 per ounce. Palladium rose 0.91% and ended at $920.90 per ounce. It was the only precious metal that was trading low, falling 0.83% and ending at $932.10 per ounce.

When reading the precious metals market, it’s important to analyze the cross-commodity rates since they give a comparative performance of these vital metals.

How Is the Gold-Silver Ratio Looking in 2017?

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When looking at the performances of gold and silver, analysts also look at funds such as the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV). These two funds have seen YTD (year-to-date) rises of 12.6% and 6.2%, respectively.

Spread analysis

The gold-silver spread measures the price of one ounce of gold in relation to silver. As of September 22, 2017, the gold-silver spread was 76.1. That indicates that it takes almost 76 ounces of silver to buy a single ounce of gold. The relative strength index for the gold-silver spread is 71.6. That high level indicates the possibility of a fall in price.

As you can see in the graph above, the ratio fell steadily after the start 2016, which indicates that it takes fewer ounces of silver to buy a single ounce of gold. Similarly, any rise in the ratio indicates strength for gold.

Mining stocks that are significantly impacted by the interplay between gold and silver and the overall mining industry include Goldcorp (GG), Alamos Gold (AGI), Randgold Resources (GOLD), and Hecla Mining (HL).

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