The gold-silver spread, or the gold-silver ratio, is an important element to consider when doing a comparative study of these two precious metals. The gold-silver spread was trading at 67.4 as of July 8, 2016. The ratio suggests that it takes almost 67 ounces of silver to buy a single ounce of gold. The ratio has seen a fall of approximately 12.2% since the beginning of 2016.
Silver has a dual role. It’s used as a safe haven during times of uncertainty, and it’s also used as an industrial metal. The rise of equities spurs industrial growth, which can help silver. An economic crisis and political unrest can also make silver rise due to a call for safe havens.
In 2016, there was both a safe-haven bid for silver during the Brexit and an industrial demand for the metal. Gold depends only on safe-haven bids to take it higher.
Silver has surged a whopping 48.6% year-to-date, while gold has managed to rise 29%. The gold-silver ratio reads the performance of gold versus silver. A downward movement means silver is getting stronger, while an upward movement means gold is getting stronger.
The RSI (relative strength index) level for the ratio is 73.5. It’s significantly above the level of 20 during the past month. A level above 70 indicates that an asset has been overbought and could see a downward revision. A level below 30 indicates that an asset has been oversold and could see an upward revision.
Funds and miners
The relative performance of gold and silver can also be studied through funds such as the iShares Silver Trust (SLV) and the iShares Gold Trust (IAU). Mining stocks that rose due to the precious metal surge include Newmont Mining (NEM), Barrick Gold (ABX), and Goldcorp (GG). These three giant miners together make up 19.% of the changes in the VanEck Vectors Gold Miners ETF (GDX).