The gap between gold and silver prices has widened this week, with silver falling nearly 5% on Monday compared with gold’s 3.3% decline. The gold/silver ratio, which divides the price of an ounce of gold by the price of an ounce of silver, now stands at 68.4. That level historically hints that silver may be positioned to recover faster than gold if the broader market turns. The divergence comes as traders focus on key US inflation and employment figures that could shape the Federal Reserve’s next move.
Gold and silver diverge
Spot gold lost roughly 3.3% on Monday, while silver shed nearly 5% on the same day. The larger drop in silver pushed the gold/silver ratio higher. The ratio is a simple measure: divide the gold price by the silver price. A reading of 80 or above has historically indicated that silver is cheap relative to gold; a reading of 20 or below suggests the opposite. At 68.4, the ratio sits in a middle ground that often precedes a period in which the weaker metal – here, silver – catches up if a recovery materialises.
Why silver is lagging behind
According to the Commitment of Traders (COT) report, fund positioning has moved away from silver during the recent macroeconomic volatility. Reduced industrial demand is also a factor: BMO Capital Markets notes that solar manufacturers are cutting the amount of silver used in each cell through narrower metallisation lines, greater substitution of copper, and wider use of silver-coated copper pastes. Together, these trends explain why silver is underperforming gold, and the picture is unlikely to change in the near term without a clear catalyst.
US data in focus
This week’s US releases will be closely watched. On Wednesday, the Personal Consumption Expenditures (PCE) Price Index for August is due. The Fed’s preferred inflation gauge is forecast at 3.4% year on year, nearly double the central bank’s 2% target. A higher-than-expected reading would reinforce expectations that the Fed will raise interest rates in October – odds were above 70% at the time of writing. A lower reading would introduce doubt, though a single data point is unlikely to shift the consensus; at least three consecutive lower readings would be needed to alter speculative pricing.
On Friday, the September Nonfarm Payrolls (NFP) report will follow. The unemployment rate is expected to hold at 4.1%, with 84,000 new jobs added. Strong figures would support the case for continued US dollar strength, which typically pressures precious metals. A weaker report would have limited impact, as one disappointing number does not change the broader trend.
What the ratio signals
The gold/silver ratio at 68.4 does not guarantee a reversal, but it does highlight that silver has more ground to regain if market conditions shift. The biggest risk is that both metals extend their recent losses as demand for the US dollar remains high. Dollar strength is driven by speculation that the Fed must keep raising rates to control inflation, and until that speculation fades, gold and silver are likely to stay under pressure. For reference, the live gold price is updated constantly on GoldRate.info.
Key takeaways
- Gold lost 3.3% and silver lost nearly 5% on Monday, widening the gold/silver ratio to 68.4.
- A gold/silver ratio above 80 typically signals undervalued silver; at 68.4, silver may recover faster if the market turns.
- Silver’s underperformance is partly due to fund repositioning and reduced industrial demand from solar manufacturers.
- Upcoming US PCE inflation data and the September jobs report will influence Fed rate expectations and USD strength, affecting precious metal prices.
Common questions
What is the gold/silver ratio?
The gold/silver ratio is the price of one ounce of gold divided by the price of one ounce of silver. It is used to track the relative value of the two metals historically.
Why is silver underperforming gold?
According to the Commitment of Traders report, fund positioning has moved away from silver amid macroeconomic volatility. Additionally, industrial demand has fallen as solar manufacturers reduce silver use per cell.
What US data is being released this week?
The Personal Consumption Expenditures (PCE) Price Index for August is due on Wednesday, and the September Nonfarm Payrolls (NFP) report is scheduled for Friday. Both are closely watched for signals on Federal Reserve policy.
In the near term, both metals are likely to remain under pressure from a strong US dollar and elevated bond yields. The 10-year Treasury yield hit a multi-decade high of 5.26% on Tuesday, reflecting persistent inflation concerns and mounting US debt. Until the macroeconomic picture shifts, silver and gold will continue to move in response to the same forces – but the gap between them suggests that any recovery could favour silver first.