The gold:silver ratio may have found resistance at 1:59, suggesting silver prices could outperform gold in coming months. The last time we saw a similar technical pattern developing was in June 2010, before the ratio moved from 1:70 to 1:32 in April 2011. During that time, silver prices jumped 180% compared to gold’s more modest 58% increase. Now the gold:silver ratio appears to be reversing in silver’s favor, well supported by strong demand that continues to vastly outpace that of gold.
Although the World Gold Council thinks global gold investment demand in 2011 rose 33% yr/yr, the Silver Institute says investment demand for silver probably increased 66%. Those projections are further backed by evidence of increasing physical demand, which pushed silver coin sales across the world to record levels. The U.S. Mint, for instance, sold 15% more American Eagle silver bullion coins in 2011. That may not seem like much, but 2010 was also a record year for silver coin sales. By comparison, gold American Eagle coin sales were actually down about 18% in 2011 (in terms of total ounces, not number of coins). As we reported back in July, Australia’s Perth Mint’s silver coin sales from January to June alone were 66% higher than all of 2010, and in September, the Mint said sales were still at “unprecedented levels.” Australian gold coin sales, however, were not nearly as high.
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