The novel coronavirus has shattered our lives. We are living through a health crisis that has brought the economy to its knees. The precious metal market has been influenced in an interesting way the price of gold rose the price of silver plunged. Investors who had a lot of gold to sell could swop their gold and buy silver at low prices.
The price of gold pushed past the $2,000 mark and threatened to go further as governments across the globe put measures in place to inject liquidity and revive the economy. This move led to central banks across the world taking more aggressive decisions than they did during the 2008 financial crisis.
As news of the virus dominates headlines, silver plunged by 28%, the worst it has ever been since 1983. That was in March, right when the panic and the lockdowns set in.
Around this time, mints and gold dealers were reporting shortages in the gold bullion stocks. Everyone was scrambling to sell their gold to take advantage of the effect that the virus was having on the price of gold. Some were selling their gold because they were facing a shortage of cash as businesses closed down and companies were trimming their staff down.
For a couple of weeks, it looked like silver was losing ground. However, the thing that made gold and silver remarkable then was that the ratio of gold and silver reached the highest point it had ever reached in over 5,120 years. It reached 124 in March 2020.
What is the silver-gold ratio and why should you care about it? Simply put, the silver-gold ratio measures the strength of gold to silver. It shows the ounces of silver it would take to buy one ounce of gold. This number is calculated by dividing the current price of gold by the current price of silver.
For years this number has hovered around 60 but in 2013it reached 80 and at the beginning of the pandemic, it reached the 100s. Historically, the ratio has always corrected itself. As of 21 September 2020, with the price of gold at $1950.00 and the price of silver at $26.11 the ratio is down to 74.
The silver market is very volatile compared to the gold market. The price of silver can rise to a great height in a matter of hours or days and plunge just as fast. The drop in the silver ratio might prompt investors to switch from silver to gold however, prudent investors will always look to buy silver when the price is low and this might just be the right time to do that before the market changes.
Silver has had a great run in the last couple of years. There is no better time to trade your gold for silver than right now. You could sell your gold jewelry or gold bullion to a reputable gold buyer whilst the price of gold is still high and buy silver whilst the price is still under $30. Buying silver now can help you weather these precarious and uncertain times we are living in right now.