In March 2020, the gold-silver price ratio grew to 95 – the highest level since 1991. This digit displays the number of silver ounces that are required to buy one ounce of gold.
On March 4, one ounce of gold was trading for $1,597 in the US futures market, while the price of silver was $16.78 an ounce. Therefore, the ratio of the two prices equaled to 95. This means you'd have to pay 95 ounces of silver to obtain one ounce of gold. It's the highest value to be recorded since February 1991.
Knowing this ratio, we can assess whether one of these metals is undervalued or overvalued. During previous uptrends in the precious metals market, the ratio was much lower. For instance, in the early 80's, the gold-silver ratio was just 17. This indicates that silver is strongly undervalued at this moment.
We should point out that in times of crisis, investors tend to view gold as a hedging asset - much more so than silver. Past experience shows that the price of silver grows rapidly during periods of high inflation. However, inflation rates are very low in the West at the moment. For the past two years, the gold-silver ratio hasn't gone below 80, though the price of silver does spike from time to time. Overall, silver is characterized by high price volatility.
The World Gold Council (WGC) has published data on the gold purchases and sales made by central banks in several countries as of late January 2020. The report shows that the central bank of Turkey increased its gold reserves by 16.2 tons, while the reserves held by commercial banks in the country increased by 18.4 tons.
Russia added 8.1 tons of gold to its reserves in January; Kazakhstan, 1 ton; and Mongolia, 1 ton. During the same month, Uzbekistan and Qatar sold 2.2 and 1.6 tons of gold respectively.
As reported by Reuters, India imported much less gold in February 2020 as opposed to the same period last year. A total of 46 tons of gold were brought into the country, compared to 77.64 tons in February 2019.
The key reason for this significant decrease in imports is the high price of gold on the internal Indian market. The monetary value of gold imports in February reached $2.36 billion, compared to $2.58 billion in February last year.
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