The gold silver ratio is approaching a record level. The quarterly chart shows that as of the close of business on May 13 with gold at $1301.80 and silver at $14.777 the ratio stood at over 88:1, a new high and the highest level since 1992 or twenty-seven years.
But Dave Smith, senior editor and analyst for the Morgan Report — a publication closely tracking the metal, has hope for silver.
“That doesn’t mean it will turn this afternoon but sometime in the reasonably near future you can expect some kind of a realignment where silver starts moving more [vis-a-vis] its relationship to gold,” Smith told LODE TV in a recent interview.
Silver has also been seeing unprecedented demand from India, a country traditionally loyal to the metal’s cousin, gold.
“Last year India had already purchased about 25% of the entire gold silver production for the year. So they’re on the path to do even more this year and that’s just one country.”
Smith almost brought up the issue of the supply crunch facing the metal, which should be price positive.
“There’s been more consumption industrialized and investment wise of silver that’s produced in a given year then has been produced and this is a trend that looks like is set to continue,” Smith said.
“There have been several massive silver projects that were supposed to go online over the next few years that have been derailed for perhaps quite some time for various issues and so these things are starting to really tell on the silver production,” he added.
And unlike gold, when silver moves it moves very quickly, Smith highlighted.
“It’s a smaller market relative to gold, in addition an awful lot of the silver that is consumed is industrial…[R]ight now the speculative demand and the investment demand has been relatively muted especially in the West, but all it takes is a relatively small uptick in that area and suddenly you have a profound move in silver.”
As for a short-term price target, Smith said that usually the summers are fairly quiet and calm.
“There’s a very real possibility that silver could make a low that seems to break trend lines which it likes to do and then turn around and become stronger earlier in the summer rather than wait until July or August.”
