uploads///Gold to Silver Ratio in

Gold and Silver Rose before the Fed’s Meeting

By

Jan. 28 2016, Updated 11:50 a.m. ET

Gold and silver

Gold and silver future prices for April and March expiration, respectively, rose by 1.4% and 2.2% on Tuesday, January 26, before the FOMC (Federal Reserve Open Market Committee) gave its verdict on the key interest rate yesterday. The overall market sentiment favored the rise of precious metals as a result of the safe-haven calls that began when the equity markets started struggling.

Over the last month, gold and silver have risen by 4.8% and 4%, respectively. The rise of these metals has gone hand-in-hand with the rise of the US dollar. The US Dollar Index (DXY), which measures the US dollar against six major world currencies, has also risen by about 1.2% over the past month. The safe-haven calls have also been reflected in the dollar, as it is a currency often chosen during times of uncertainty.

Article continues below advertisement

An important indicator for calculating the relative performance of gold and silver is the gold-silver ratio, or the gold-silver spread, which represents the number of silver ounces required to buy a single ounce of gold. The gold-silver ratio was 77.7 yesterday. This is approximately 1.4% higher than the 100-day moving average of 76.6.

The above chart shows that silver gained strength compared to gold in December 2015, as the gold-silver ratio fell to approximately 75 following the FOMC’s mid-December meeting. The rise of interest rates in December weighed on gold, which also pulled the spread lower.

Miners rise

The Global X Silver Miners ETF (SIL) and the SPDR Metals and Mining ETF (XME) have fallen by 6.4% and 14.5%, respectively, since the beginning of the year. Mining-based equities like Pan American Silver Corporation (PAAS), Silver Wheaton Corporation (SLW), and Yamana Gold (AUY) have risen by 14%, 6.9%, and 12.9%, respectively, on a trailing-five-day basis. These three stocks make up 10.5% of the VanEck Vectors Gold Miners ETF (GDX).

Advertisement

More From Market Realist

  • Open sign on a sidewalk
    Macroeconomic Analysis
    Top Reopening Stocks to Play the Shifting Market Sentiment
  • Morgan Stanley sign and stock numbers
    Macroeconomic Analysis
    Morgan Stanley's Buyback Stock Picks in 2021
  • Black Wall Street sign is sign of ethical investing
    Macroeconomic Analysis
    Ethical Investing Stocks and Funds for Your 2021 Portfolio
  • New York City skyline and Goldman Sachs logo
    Macroeconomic Analysis
    Goldman Sachs: Options Trade Picks to Play Earnings Season Volatility
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.