Silver’s recent rally has pushed prices far beyond levels supported by its historical correlation with gold, with analysis suggesting the metal is trading at a 38 per cent premium to fair value.
Data tracking the 50-day percentage changes in both metals since 1970 shows silver has risen 97 per cent over that period, compared with 20 per cent for gold. The disparity represents what analysts describe as a gross anomaly when measured against more than five decades of daily price data.
The regression model indicates that for every one per cent move in gold prices over a 50-day period, silver typically moves by approximately 1.22 per cent. Applying this formula to current conditions produces a fair value for silver of $59.25.
The analysis does not predict an imminent decline in silver or a surge in gold, but highlights the scale of silver’s short-term outperformance relative to historical norms.
Separately, revised economic data has made a Federal Reserve rate cut next week highly unlikely. The Bureau of Economic Analysis adjusted third-quarter real GDP to show annualised growth of 4.4 per cent, the fastest pace in two years. The Atlanta Fed’s GDPNow model currently projects fourth-quarter growth above five per cent.
Inflation data released this week showed core PCE, the Fed’s preferred measure, rose 0.2 per cent in November from the prior month, equivalent to 2.4 per cent annually.
With strong growth and contained inflation, the Fed is now expected to hold rates steady for much of the year. However, labour market indicators have remained weak despite the broader economic expansion. Should hiring fail to recover while inflation stays subdued, a case for rate cuts over the summer months could emerge.
