What is Happening with the Gold/Silver Ratio?

As the US dollar continues to decline and lose ground against other currencies, silver becomes stronger every day. This strength shortens the spread between gold and silver. So what should we expect to happen shortly with the gold/silver ratio?

The US dollar is not getting any stronger each day. On the contrary, after a temporary halt to its decline, the American currency continues to weaken. This weakness empowers the price of precious metals, which are shortening the gap between each other. Unless authorities apply extreme measures that help the US dollar gain strength, this tendency will not end.

Why is US Dollar Strength Important for Silver Ratio?

The US dollar is one of the main reasons for precious metals’ spot and market price to rise or fall. On the one hand, as the legal currency weakens, it becomes a less attractive means of investment. Thus, investors incline toward a more robust asset. Given the demand, that asset’s price rises and may even fail to satisfy its market. Like a vicious cycle, as the possibility of acquiring silver diminishes, its price escalates.

On the other hand, holders of other currencies find precious metals an attractive option for investment. Why is this? Because prices become cheaper as long as the US dollar becomes weak against them. However, this can be a two-edged sword. The bigger the demand, the higher the price. Thus, the gold/silver ratio becomes narrower and may continue on this path as long as the US dollar does not present any signs of recovery.

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Why Is a Weak US Dollar More Beneficial for Silver than for Gold?

As we mentioned before, the US dollar fall in price narrows the gold/silver ratio gap. Logically thinking, this may lead to the belief that a weak American currency benefits one precious metal over the other. However, gold and silver are different. Silver, a volatile metal when compared to gold, escalates more quickly. Its regular use in technology, jewellery, and other markets is a constant feature. But as it becomes an attractive asset, its price skyrockets more easily.

In this way, gold continues to grow at a slower pace, and the ratio between both precious metals decreases. As for today, this ratio has moved to 68.70 and may even head towards 67.95. Once again, as the gap between the two assets becomes narrower, silver gains even more strength.

What are The Possible Scenarios for Silver Spot Price? 

The silver spot price has been through a rebound lately. The latest reports show a price of U$25.80, which may even move to $26.30. If this happens, it will most probably reach U$26.65 shortly. According to experts on the field, this may lead to a silver spot price of U$27.00 soon. This would mean a significant rise in the price of silver, as it had recently stopped its scaling towards a theoretical U$50 price.

Contrary to this, if the silver spot price fails to go over U$25.80, the results would be different. According to forecast insights, this may cause it to fall to U$25.50. As in the case we mentioned above, this decrease would cause silver to be a less attractive asset. Thus, the fall could go as low as U$25.30 and head towards U$25.00.

This is something that investors and collectors keep under scope daily, if not minute-to-minute, basis. If you want to stay in touch with updates, news, and tips on investments, remember to subscribe to our weekly newsletter. Enjoy a one-time benefit and get a free gram of silver, just for subscribers. Follow us on our social media, and feel free to contact us for any guidance related to investments.

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