Gold May Beat Silver, Lifting Ratio by as Much as 20%: Technical Analysis

Gold may outperform silver, lifting the ratio between the two metals by as much as 20 percent, according to technical analysis by Societe Generale SA.

The attached chart shows the ratio of gold to silver steadied after dropping as low as 46.6 last week, near a two- year channel support line and the lows of 2008 and 1999. The second chart shows the ratio may climb to between about 56 and 58, which are retracement levels of the decline from June that are singled out in so-called Fibonacci analysis.

“The gold-silver ratio reached an important support at 47.5/46,” said Stephanie Aymes, a cross-commodity technical analyst with Societe Generale in London. “Gold will outperform silver to 56/58.”

An ounce of gold bought as little as 46.6 ounces of silver in London on Dec. 7, the least in almost four years. Precious metals gained this year on demand for a protection of wealth and an alternative to currencies. Some investors betting that silver may benefit from an economic recovery pushed the metal’s 2010 advance to 70 percent, outperforming gold’s 26 percent gain. Silver is used more in industry than gold. (more)