Sunday, February 7, 2010

Gold, Silver, Copper & Oil

I've posted several charts today using the Gold/Silver Ratio (GSR) along with a few short term and longer term inflection points and the returns of Gold, silver & copper. Also, a chart I've used several few times comparing the move in gold against crude oil and a 4 month lag period.
Gold / Silver Ratio (GSR): When a ratio is increasing, it means that the numerator is increasing faster than the denominator OR the numerator is not dropping as fast as the denominator. Outperformance means either moving up faster or not dropping as quickly. This is why I included Gold and Silver price history at the bottom of the chart so you can see the relative movement.

Gold for most investors equates to 'safety' in times of uncertainty, Silver straddles the line between a currency and a commodity since it has more of an industrial use than gold. Copper is the most industrial of the metals.
Silver is much more correlated to positive economic activity (where we have sustainable growth in commodities as fuel for productive economic endeavors). This optimism typically occurs during times of leverage and liquidity. My call for 2010 has been that silver will outperform gold. However, in the shorter term the weakness in the Euro and rally in the Dollar has made traders back off of the 'carry trade'... I believe that we'll see this reverse course very soon.


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