Silver, following gold, declined for second week on a row. Investors and traders move their assets away from safe-havens and into cash and treasuries.
The current silver price is managing to keep its head above the psychologically significant $40 level, which it hasn’t had a weekly close below since early August this year.
The gold:silver ratio has been fairly volatile over the last year; it started out at 62 but quickly and steeply trended lower, without many pauses on the way, to reach a low 30 in May before snapping higher to 45 at the end of May. Since then it’s generally ranged between 45 and 40, more towards the top end too. Should the ratio return to its bearish trend, market players will be turning bullish on the white metal.
Urs Gmuer, asset manager at Dolefin, a Swiss investment advice firm said silver is set for a greater upward run than gold, with the market due to correct a distortion in its pricing of silver in relation to gold. Gmuer said declining silver output over the last 60 years-as a result of inventory depletion and mine closures-meant silver supplies currently outnumber gold by a ratio of less than 10:1, thus indicating a market correction is due.
Once this occurs, Gmuer said that silver prices would settle at 10 percent to 15 percent of gold. This implies that if gold reaches $6,200 per ounce, silver will peak at between $620 and $930 per ounce.
However, considering the signals coming from the market and the technical charts, as of now, the outlook for both gold and silver is bearish.
