The ratio of gold and silver prices may move above the 71-level mark from the current level of 69.47, with sharp correction recorded in the silver prices. Silver prices usually move in tandem with gold, having a positive correlation of over 90% over the last five years. Silver corrected around 68%, since its lifetime high of $21.35 an ounce, and currently hovering near $10.68-levels on Thursday.
?Prices have been undervalued by the investors, when compared to gold. Silver prices have not increased much as that of gold,? an analyst with Karvy Comtrade said. The ratio between gold and silver prices is currently standing at the 69.47-level, which is below the lifetime high of 82.11. The ratio has increased dramatically in the last few sessions, as silver prices declined substantially, when compared to gold. The mean of the ratio in past ten years have been at 59.66. It looks as though the ratio still has the potential to move above the 71-level in the near term, he said.
While COMEX gold recorded gains of around 8% to trade at $758.9 an ounce ($703.2) in the last one year, COMEX silver had declined drastically by 16% to $10.68 levels from $12.76 an ounce last year. The reasons for such a high-magnitude decline in silver prices were the slowdown in industrial activity in major economies (especially euro), declining gold and crude oil prices and a sharp appreciation in value of dollar against the euro. The industrial demand constitutes around 50% of the total sliver demand.