Breaking News

Silver Looking Brighter Than Gold

By Michael A. GayedCommoditiesAug 21, 2012 02:02AM ET
Silver Looking Brighter Than Gold
By Michael A. Gayed   |  Aug 21, 2012 02:02AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

“Sometimes you're in great demand. Then suddenly your career hits the breaks.” - Gary Sinise

As the Summer Surprise of higher highs, persistent reflation, and the end to the end of the world trade continues, I have been receiving questions about commodities, specifically as it relates to silver (SLV) and gold (GLD). Often referred to as “poor man's gold” given that it generally trades at a discount to the yellow metal, silver relative to gold appears to have washed out. I have been noting that I believe the next wave higher for risk assets could easily be led by emerging market stocks and commodities, but within that trade, silver looks to be more sensitive to a return of growth expectations. Why? Because relative to gold, silver is used more in industrial production comparatively speaking.

With that said, take a look below at the price ratio of the iShares Silver Trust ETF (SLV) relative to the SPDR Gold Trust ETF (GLD). As a reminder, a rising price ratio means the numerator/SLV is outperforming (up more/down less) the denominator/GLD.


Silver massively outperformed gold from August 2010 to April 2011, and sharply weakened as margin requirement were increased. Much of the continuation of that weakness appears to be related to the deflation scare that picked up during the Summer Crash of 2011. Higher sensitivity to industrial demand meant that as risk sentiment turned more depressive, gold performed better simply because demand is more driven by jewelry and for investment purposes. Notice the far right of the chart, which shows that the ratio appears to have not only stabilized, but may also be in the early stages of leadership. I believe this is because expectations are increasing on industrial demand. For now then, poor man's gold may be a better trade than gold itself.

Disclaimer: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Silver Looking Brighter Than Gold
Silver Looking Brighter Than Gold

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Write your thoughts here
Replace the attached chart with a new chart ?
Post also to:
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email