By rights, this ought to be a bad time for anyone trading or investing in gold.
The dollar has climbed steadily against the euro during the last 12 months, giving market players a solid alternative to gold as a safe-haven investment.
And signs of imminent recession should surely be taking some of the shine off the yellow metal, given bullion is in some ways the ultimate hedge against inflation, and recessions are deflationary.
Gold-silver ratio climbing
Any number of financial rules seem to have been torn up in recent years – not least as regards central-bank money creation and big government deficits – it would seem that the traditional rules for gold are also now redundant.
The price was up 0.6% this morning at $1,532.45 an ounce, and since early August it has been trading at five-year highs.
A month ago, on 5 August, it was worth $1,457.45, while three months ago, on 4 June, it traded at $1,323.60.
Twelve months back, it was down at $1,195.75.
Nor is gold becoming pricier simply in dollar terms. In relation to its fellow member of the bullion family, silver, its cost has surged. Currently trading at just under $20 an ounce, silver is clearly much less valuable than gold.
However, the key number to look for is not the price itself as much as the “gold-silver” ratio. By dividing the gold price by the silver price, traders and investors can work out how many ounces of silver would be needed to buy one ounce of gold.
Action may be price driven
Thus, when the ratio rises, this means gold is becoming more expensive compared with the “grey metal”, and when it falls it tells market players that silver has become more expensive relative to gold and vice versa. Currently, the ratio stands at a significantly high level of 79.64, meaning just under 80 ounces of silver would be needed to buy one of gold.
It was a little higher one month ago, on August 5th, when it stood at 89.26, and six months ago, on March 5th, when it traded at 85.09. A year ago, on 3 September 2018, it traded at 84.11.
Meanwhile, in contrast to previous surges in the gold price, this is not a reflection of a weaker dollar. Against the euro, the dollar was down a little this morning, off 0.13% at €0.91, but this is higher than the rate a month ago on 5 August, at €0.8928 and on 4 June, when it stood at €0.8887.
It was lower still a year ago, on 4 September 2018, when a dollar bought just €0.8633.
One factor driving gold may be charted-based activity, with some traders believing bullion is breaking out of a previous trading pattern and heading higher.