The prices of gold and silver keep on changing from one day to the other and what do you think is the cause? This divergence started in January but silver started dropping in the late February. 2016 has been held high by gold and this is what are referring to the divergence between silver and Gold. There are several reasons why we have this divergence between the prices of Gold and Silver. One of the core reasons why this divergence occurs is because of the gold/silver ration. This is that method that is being used in assessing the values that one metal has in relation to the other. There is another fundamental reason for the divergence and this reason is simply due to the demand and the applications of these metals. Therefore do not be worried when you find that gold and silver prices are diverging. The reasons for the divergence between gold and silver are explained below:
Demand and supply and also the use of the metal
This is one of the reasons why there is a slightly big divergence between the prices of silver and gold. Silver and gold are traded markets and therefore one metal can outperform the other on the market making one to be cheap and the other to be expensive. This is a multi-year trend where you will find that there two metals are outcompeting each other due to their use making one to sell more than the other.
That is why when prices of the same goods and services are competing; one will automatically reach an extreme before a reversal measure is taken. Gold and silver ratio keeps in changing depending on the market prices, use and the time of the year. For example you can find that the price of silver per ounce is high and the price of gold per once is low, in this case it means that Silver is on high demand as compared to gold. In most cases traders are emotional due to the fact that they take silver to be forgotten and favor gold because it is expensive. Supply and demand also helps determine the prices of gold and silver. Gold’s strength comes from central bank buying and in 2015 it was at its highest price.
The Gold/Silver ratio
In most cases, the prices of gold and silver keep moving together. The Gold Trust (GLD) and the Silver Trust (SLV) tend to move in directions that are opposite and in this case the periods of these two different metals outperform one another. The Gold and Silver market is a very competitive market but in most cases Gold outperforms silver. Why do you think gold outperforms silver? It’s because gold is expensive and it’s highly demanded as compared to silver and therefore it outperforms silver very easily. Gold is staying higher, surging higher and on the other hand silver is surging less and is falling off from its original heights. The gold/silver ratio can determine the amount of silver for sale that is on the market or the price of buying gold bars.
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