More to Go on Silver Adjustment

The silver price has begun to retrieve the losses against gold accumulated over nearly five years. The shorter term of the two charts highlights the five percentage point outperformance by the silver price since the end of June and a total gain of 27% since the beginning of June compared with the 12% rise in the gold price. The chart also shows that the upward silver price momentum has stalled somewhat over the last few days. The second chart puts these near term price movements in the broader historical context of the past 35 years. Despite the size of the recent relative price movements, the silver price remains near the upper end of the historical range in the gold/silver price ratio. The historical pattern suggests a strong tendency to mean reversion in the ratio. The history also suggests that the price adjustment process can persist for many months once commenced and before being completed.