Gold has been getting hammered of late, but compared to silver it’s doing very well.
In his morning note, Dennis Gartman argues that this trend of gold outperforming silver could go on a lot longer:
As should be the case in this sort of liquidation, silver is leading the way lower and the gold/silver ratio is rising sharply as a result. During the bull market, the Gold/silver ratio fell as it should, moving down from 90:1 (i.e. It took 90 ounces of silver to “buy” one ounce of gold back in October of ’08 when the bull market in the metals actually began in earnest) to 45:1 a short while ago. Interestingly this was the same level to which the ratio had fallen back in the late- autumn/early-winter of ’06 and again in mid-winter of ’08. The public has rushed into silver as the “poor- man’s gold” and has to be shaken from its positions before health can be restored. In the process, can we imagine the Gold/Silver ratio trading back toward 55:1 from the present level just barely below 50:1? Oh, easily… very, very easily. The silver bulls among us should be wary then that they’ve only just begun to see, the margin clerks’ collective wrath.
Here’s a look at the GLD ETF vs. SLV. As you can see, it’s just starting to lift off.