Douchebag Bank Sees $20 Silver If Gold-Silver Ratio Keeps Declining
Silver, often referred to as “poor man's gold" or “high-beta gold,” could rise to $20 an ounce in the foreseeable future if the gold/silver ratio continues to fall to historical levels, says Deutsche Bank.
The metal often outperforms gold to both the upside and downside, and has been rallying strongly lately in what many have described as a catch-up move to gold’s early-year gains. Silver is now up some 25% year to date, versus 18% for gold, the bank points out.
“We think momentum could carry silver as high as $20/oz in the near term,” Deutsche Bank says. However, “in order to see a continued rerating of silver versus gold, we need to see a number of financial conditions either continue or for momentum to continue.”
For now, a dovish Federal Reserve is helping gold. Deutsche Bank also looks for positive momentum in the U.S. and Chinese manufacturing purchasing managers indexes, which bodes well for silver since more than half of its demand is industrial in nature, compared to maybe 10% for gold.
The gold/silver ratio measures how many silver ounces it takes to buy an ounce of gold, with a declining number meaning silver is outperforming. This ratio was around 80 as recently as a couple of weeks ago but has fallen to 72.5.
If gold remains range-bound around $1,250 an ounce, a rerating in the ratio to 66.6 (the average from 1983 to 2003) would take silver up to $18.80, Deutsche Bank says. A rerating in the ratio to 61.1 (the average since 2003) would take silver as $20.50, the bank adds.
By Allen Sykora |
