Spot Silver Price Chart - Daily Silver Prices 19th June 2009

Spot Silver Price Chart - Daily Silver Prices 19th June 2009

A feature across all the markets at present, whether commodities, stocks or currencies, seems to be the recurring theme that all are delicately poised and preparing for a major move as they consolidate sideways, and this is particularly true of both silver and gold.   With little fundamental news being released today, and coupled with “triple witching” in the options market, which is a rare occurrence, and with the weekend ahead today we are unlikely to see any evidence of a catalyst to spark some life into the markets.  As a result I thought it would be beneficial to look again at the gold silver ratio and what conclusions we may be able to draw, if any.  In simple terms the ratio is the price of gold divided by the price of silver and, of course, the question always remains as to what the optimum ratio should be.  Over the years this has varied between a low of 10 to 1 and a high of 98 to 1, last achieved in 1991.  Today’s rate is fractionally below 66, having fallen significantly in the last few months, having fallen back from the highs of 80 seen earlier in the year which effectively reflected the surge in gold prices as opposed to silver which were more moderate.   The general consensus of opinion is that the median point for the ratio should be somewhere between 50 and 55, although of course this figure is purely arbitrary and based on the annual charts for the ratio which look back over the past 20 years.  Today’s ratio of 66 is tending to move the prices for these two commodities closer into line suggesting that we may see a closer correlation in terms of percentage price moves than we have seen so far this year, as in most cases silver will tend to outperform gold both in up and down moves.

Looking at the current technical picture spot silver prices are delicately balanced on the 40 day moving average, exactly the same as for spot gold and any move in a correlated market such as equities or currency could prove to be the tipping point with only the $14 per ounce price region providing any barrier to a move lower.   With all options expiring later today and the weekend ahead today is not a day for trading silver.  In yesterday’s price action silver lost 13 cents to settle at $14.230 per ounce.

The short and medium sideways, long term bullish.

Support:    $14.125 (yesterday’s low)                                   Resistance: $14.830 (high of 22/05/09)

Support:    $13.930 (low of 17/06/09)                                   Resistance: $14.550 (high of 21/05/09)

Support:    $13.830 (low of 12/05/09)                                   Resistance: $14.400 (yesterday’s high)