Silver usually outperforms gold in financial crises despite 2008 exception

Silver usually outperforms gold by a very significant margin in global financial crises, according to a historical analysis by ArabianMoney contributor Rolf Nef, manager of the Swiss-based Tell Gold & Silver Fund.

A notable exception to this rule was the 2008 global financial crisis when silver’s 52 per cent plunge in value was almost double the price fall for gold.

Silver vs Gold

This chart shows the ratio of gold to silver over the past 50 years. Back in 1968 when the $35-an-ounce gold price set in the 30’s depression was finally abandoned, the gold-to-silver ratio was about 15 – close to the long-run century’s old average for this ratio. In the volatile 70s the silver-to-gold ratio held much lower than today, and in 1980 it was only 17.

That ratio of 17 at the peak of the last precious metals’ bull market compares with 42 today. Mr Nef argues that the recent break below 46 is significant and opens up the way for a gold:silver  ratio of at least 20, producing a considerable outperformance for the silver price compared to gold.

Elliott Wave

He is a fan of Elliott Wave analysis and sees the autumn of 2008 as the start of the final fifth wave and the most explosive period for commodity prices. $45 an ounce silver he thinks easily achieveable very soon but the upside is much greater.

Gold at $2,000-an-ounce would bring $100 silver if the gold:silver ratio reverts to its historic position in a bull market upturn, and $5,000 gold would mean $250-an-ounce for silver.

Mr Nef does not offer a forecast but merely says he wants to move his money out of silver and silver options in the parabolic phase. ArabianMoney is going to keep a careful watch on his analysis, and consider this further in the next monthly newsletter (click here to sign-up).