Gold to Silver Ratio: What Can We Expect Now After QE3?

This week:

  • QEternity Aftermath

  • Gold to Silver Ratio

  • The High NZ Dollar

  • Why Buy Gold?

QEternity Aftermath

So what’s happened since the announcement of QEternity? Well after a bit of a bump higher gold and silver just seem to be consolidating at the moment as you can see in the charts below.

NZD Gold Chart

Gold seems to be in a rising channel but overhead resistance of about NZ$2175 has a cap on the price at the moment.  Silver too is just hovering at the moment.

NZD Silver Chart

Maybe this pause is in response to much of the mainstream talk about QE infinity not having any major impact. Rather than listen to them we’d rather take note of Jim Sinclair who has “skin in the game” in the form of a mine in Tanzania and whose track record for not only this precious metals bull market but also the last one in the 70’s speaks for itself. This morning he wrote:

“All the talking heads and writers are on a tear saying QE will do nothing, emphasizing deflationary scenarios both from within the community to financial TV. Those that take that position are raving morons.

The markets today are full of normal manipulation based on the MSM disinformation that QE to infinity is a hollow tool. It is dynamite and will have an impact of historical dimensions, but not necessarily the ones the morons expect.


Keep your gold investments. Gold is going to $3500 and beyond, about which there is no question. Stand tall. Don’t trade, and shut off the gold naysayers sensationalists we have battled from $248 to today.


This is nothing different from the disinformation of early 1979. The Philadelphia Fed president is an example of MSM disinformation.”

Of course that doesn’t mean gold is flying higher today, just in the long run. There is a lot of positive sentiment in stock markets and also in gold and silver so we are ripe for a correction now. Some of the broad market sentiment indicators are showing the most bullish readings for some time.  Likewise silver futures traders are nearing an extreme in bullishness, a complete about face from a couple of months ago.

The tricky thing is these measures don’t always mean a crash in prices occurs. We could just as easily see prices go sideways for a month or 2 here.

Gold to Silver Ratio

Another reason we could see a pause now is shown by this chart we pinched from Money Morning Australia

It’s shows the gold to silver ratio (the number of ounces of silver it takes to buy one ounce of gold), and how it performed in the lead up to the announcement of QE2 and then the aftermath.

Gold/Silver Ratio Chart and QE3

As you can see silver rose faster than gold when QE2 was expected as investors bought silver, then took a pause for a month or two, before again outperforming gold. We have seen a repeat of the outperformance of silver to gold in the lead up to the latest money printing announcement, and now perhaps we are again seeing a pause in silver compared to gold. Maybe then to be followed by the ratio heading down again as silver rises in price faster than gold.

MoneyMorning writer Dr Alex Cowie also pointed out…

“Looking at the moving averages in the chart above, you can see that the 50-day moving average (blue line) is close to crossing under the 200-day moving average (red line). This is a powerful signal of a changing trend. You can see it happened before QE2. It heralded the big move down for the ratio, and saw the silver price soar.”

Interestingly we also noted last week that this same technical indicator is about to occur in the NZ dollar gold and silver price charts.

So further evidence of the stars aligning for silver in particular.

To see how the Gold Silver Ratio is calculated, how it can be used, and where it might head to next see: What is the Gold/Silver Ratio?

The High NZ Dollar

If a larger correction in gold and silver occurs of course what the NZ dollar does will also play a role in the local prices. When traders go “risk off” we usually see the kiwi dollar fall too, so this could well negate much of any possible fall in the US dollar prices of precious metals.

This past week there has been much discussion in the media of whether there should be more intervention by the RBNZ and whether they need more “tools” to impact the exchange rate and help out exporters.  Labour Finance Spokesman David Parker wants action against the high dollar but hasn’t really outlined how.

See these articles in the NZ press:

Inflation targeting has failed, RBNZ needs to change, says Parker

Again Parker wants action against high kiwi dollar.

Incoming RBNZ Governor sees scope to lean against “imbalances”

But Bill English has confirmed the Government has no intention of going down this path, stating that, “It was highly arguable whether more unconventional policies like quantitative easing, capital controls or currency pegging enacted in (respectively) Japan, Brazil, and Switzerland were making any headway, given the large risks they created”. Source.

So for now New Zealand is not going to join the currency wars. But we’ll reserve judgement until things get a lot worse and see if we still remain sidelined then.

As Brian Fallow rightly points out in this article as a nation we’re as much to blame with low savings and high reliance on external funding… 

“The more we rely on importing the savings of foreigners, the more demand there is for New Zealand dollars. And the less we are in a position to dictate the terms on which we will accept them, through capital controls.”

Because of course countries like Singapore and China that peg their currencies to the US dollar have massive foreign currency reserves with which to fund this strategy. Whereas we have a massive current account deficit and sizable net external debt of 70% of GDP.

As usual the poli’s look at band aids while ignoring or being ignorant of the root problems of these imbalances – the global monetary system. That a few men (and women) around a table can correctly decide on the price of money (interest) in a given country is totally absurd.

Why Buy Gold?

At a kids birthday party in the weekend (of all places!) we got into a brief discussion on gold. We were asked about what we did for a buck etc and when we mentioned selling gold and silver the response was “Gold’s been rising a lot lately alright so you must be doing alright. But I don’t know if now is a good time to buy. Can it go any higher?”

Our response was while central banks keep creating currency it could go a whole lot higher yet. This person wasn’t totally convinced. Interested yes, convinced no.  This is a change from a few years ago when we were almost embarrassed to admit what we did. At least we got a discussion not a blank stare like back then! But it remains the common response – “it can’t go any higher why buy now at the top?” Usually the indicator of a top is just the opposite when everyone is talking about it – how, where and what to buy.

Anyway it got us thinking about why to buy gold now and so we put down all the reasons we could think of in one article for the first time in this weeks feature article:

Why Buy Gold?

(Intros to the other article and video on the site this week are at the end of this as always.)

If you come to the same conclusions as us as to why to buy gold, then get in contact and we can help you out.

1. Email:

2. Phone: 0800 888 GOLD ( 0800 888 465 )

3. or Online order form with indicative pricing

Have a golden week!

  Glenn (and David)

Ph: 0800 888 465

From outside NZ: +64 9 281 3898


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This Weeks Articles

Price Targets in NZ Dollars for Next Move Up in Gold and Silver

2012-09-18 23:10:57-04

This week: How will QE3 Affect New Zealand? Let’s Get Technical on Gold and Silver! Late News Just In – A Total Game Changer for Gold How will QE3 Affect New Zealand? September 13, 2012. We think this date will be looked back upon in financial history as a game changing date. Of course you’ll […] read more…

G. Edward Griffin: Legalized Plunder

2012-09-19 22:05:22-04

“Legalized Plunder – Why we have all been had, fooled and deceived…. and the surprising reason we keep asking for more of the same bad medicine” Author G Edward Griffin was pilloried from all sides when his book The Creature from Jekyll Island was first published in 1994. [Editors note: If you’ve not yet read […] read more…

John Mauldin’s Prescription for Avoiding Economic Catastrophe

2012-09-25 18:29:50-04

We’ve been on John Mauldin’s newsletter list for some time and have often thought he seemed a bit optimistic in his views. However he coined the phrase “muddle through economy” and that is certainly what most of the world has seen to date, so he has been on the money there. Below he outlines what […] read more…

Why Buy Gold?

2012-09-25 18:32:26-04

“Gold’s been going up a fair bit but surely it can’t go any higher?” That’s one of the common responses we get when we mention we are involved in selling gold and silver bullion. Unlike a number of years ago the average guy or girl in the street now knows that gold has been rising […] read more…  

The Legal stuff – Disclaimer:

We are not financial advisors, accountants or lawyers. Any information we provide is not intended as investment or financial advice. It is merely information based upon our own experiences. The information we discuss is of a general nature and should merely be used as a place to start your own research and you definitely should conduct your own due diligence. You should seek professional investment or financial advice before making any decisions.   To see how the Gold Silver Ratio is calculated, how it can be used, and where it might head to next see: What is the Gold/Silver Ratio?

1 thoughts on “Gold to Silver Ratio: What Can We Expect Now After QE3?

  1. Pingback: Winston Peters - Let’s Join the Currency Wars | Gold Prices | Gold Investing Guide

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