There are no visible triggers that could put a cap on the gold-silver ratio, ICBC Standard Bank said in a report.
The gold-silver ratio has been trading at around 80 recently, nearing two-year highs on silver’s underperformance.
“[The ratio] has not [traded] sustainably [above that level] since the early 1990s,” analyst at ICBC Marcus Garvey said in a report published on Thursday.
“Inevitably, given the historical precedent, this has raised the question of whether bullion investors are being presented with a contrarian opportunity to position for a reversal,” Garvey said. “In the very short-term, we think the answer is yes but, over time, we see few reasons to believe that the ratio is subject to any kind of cap … Once positioning has cleaned, we could well be going back to the 1990s.”
Garvey pointed out that the rising ratio is not “an acute issue” and is being driven by “silver’s chronic multi-year underperformance.”
Not much can explain silver’s recent underperformance in comparison to gold, the analyst noted.
“There is nothing in the current swap rates or physical leasing market – which, largely driven by Libor rises, have trended higher together over the past year – to explain silver’s lackluster performance,” Garvey wrote.
Kitco.com showed the gold-silver ratio was last trading between the high of 81.73 and the low of 80.93.
Gold prices had an uneventful trading session prior to the start of the long weekend after tumbling down to $1,325 level on Wednesday.
“Gold prices were ending the U.S. day session slightly lower Thursday, on some chart consolidation after this week’s stronger selling pressure that did produce some near-term technical damage,” Kitco’s senior technical analyst Jim Wyckoff said in his PM Roundup. The gold market is now short-term oversold, technically, and due for a corrective bounce early next week.”
April Comex gold futures were last at $1,325.40, up 0.09% on the day, while May Comex silver was last at $16.32, up 0.41% on the day.