Gold versus silver
When we look at the precious metals market and compare gold and silver, it’s important to assess their relative price movement by using the gold-silver spread. Over the past one-month period, gold has dropped ~0.8%, while silver has dropped 4.8%. Although silver mostly follows the same trend as gold, its volatility far exceeds that of gold.
The chart below explains the price fluctuations in the gold-silver spread since December 2015.
The gold-silver ratio
The gold-silver ratio, or spread, measures the number of silver ounces it takes to buy a single ounce of gold. In other words, this ratio represents the price of gold in terms of silver.
On June 19, the gold-silver spread was 75.1, which indicates that it takes almost 75 ounces of silver to purchase one ounce of gold. This spread has increased considerably over the past one-month period.
The gold-silver spread touched a peak of 85 in late 2008. The RSI level of the gold-silver ratio is 80.8, suggesting a possible pullback in the spread. An RSI reading above 70 indicates a fall in price, while an RSI reading below 30 indicates a rise in price.