Industrial vs. Monetary Value.
While Gold is primarily a monetary asset, over 50% of Silver demand comes from industrial use. This means Silver can trend with industrial commodities like Copper.
During economic expansions, Silver often outperforms Gold; during recessions, it can lag unless the 'safe-haven' bid is exceptionally strong.
Managing Silver's Volatility.
- Wide Spreads: During low liquidity hours (Asian session), Silver spreads can widen significantly.
- Sharp Reversals: Silver is known for 'stop-running'—spiking past a key level to clear orders before reversing.
- Position Sizing: Because 1% in Silver happens faster than 1% in most forex pairs, use lower leverage.
The Gold-Silver Ratio.
Traders often watch the Gold-Silver ratio (Price of Gold / Price of Silver). When the ratio is historically high, it suggests Silver is undervalued relative to Gold.
Using this ratio can help you decide which metal to favor for a long or short position at any given time.
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