Silver prices are often thought of as being separate and apart from gold prices, even though the metals themselves bear many basic similarities. They are both precious metals. They are both bought in their refined form for their bullion value and working use. There is a correlation between silver prices and gold prices. Understanding this correlation gives a better chance at predicting the fluctuations of silver prices.
When there is a financial crisis, attention is turned to gold. Gold is the first thing people invest in when they are concerned that the stock market will be going through a volatile period. This is mainly due to the publicity gold has received through the years as being a safe haven in trying financial times. As a result, the demand for gold goes up. This, coupled with the limited reserves of gold, causes gold prices to increase.
As gold prices begin to increase, more people start looking at the metal market. Silver prices, during this time, remain relatively low. They do not garner the attention that gold prices do. Eventually, the price of gold grows to the point at which it becomes unsustainable. Investors begin to worry that gold prices will rapidly drop. They look for other places to invest their money; places which will allow it to grow while being protected from the changing financial climate.
Since people are already focusing their attention on the metal market, they immediately notice that silver prices are exceedingly low compared to gold prices. They can sell off most or all of their gold investments and opt for silver. This is when silver prices soar. On average, for every ounce of gold that people sell, they can purchase sixty ounces of silver. This is due to already low silver prices and inflated gold prices. The result of this is a huge, sudden demand in the silver market and a sudden drop in the gold demand.
As can be seen, the price on silver follows a particular pattern during economic turmoil. It is important for an investor to understand the relationship between gold and silver prices in order to maximize gains and minimize losses in the relevant markets.