When analyzing precious metals and precious metal mining companies, it’s essential to analyze the relationship between precious metals. There have been considerable ups and downs in precious metals since the beginning of 2018. Year-to-date, gold has risen 1.1%, and silver has fallen 2.2%.
Silver is often more inclined toward the industrial side of the market, which could be why silver followed equities. The VanEck Vectors Gold Miners ETF (GDX) and Global X Silver Miners ETF (SIL) have fallen 1.3% and 4.5% this year, respectively. However, on May 10, they rose 1.4% and 1.9%.
Gold overpowering silver
Let’s look at the gold-silver ratio, which represents the number of silver ounces it takes to invest in a single ounce of gold. The spread was at 78.8 on May 10, meaning it would require almost 79 silver ounces to buy a single ounce of gold. A higher ratio indicates more strength for gold over silver, and vice versa. The ratio has dropped considerably since the beginning of the month.
The gold-silver spread’s RSI (relative strength index) score was 58.9 on April 5. An RSI below 30 suggests a possible price increase, while an RSI above 70 suggests a downturn. Mining stocks are affected by the interplay between gold, silver, and the overall mining industry. Miners Yamana Gold (AUY), Franco-Nevada (FNV), Agnico Eagle Mines (AEM), and Barrick Gold (ABX) have risen 6.4%, 7.3%, 3.1%, and 6%, respectively. In the next part of this series, we’ll look at the gold-palladium spread.