Gold vs Silver Valuations Diverge as One Metal Looks Overvalued
Monarch PMS has been analyzing gold and silver prices in relation to their fair-value zones. The brokerage suggests that gold, currently trading at around $4,355 an ounce, is no longer cheap as it remains above its estimated fair-value midpoint of $3,922.
In contrast, silver's price of around $61.7 appears relatively undervalued under Monarch PMS' 60:1 gold-silver ratio framework, which estimates a fair-value range of $54 to $77 an ounce for the metal, with a midpoint of $65.
The brokerage attributes the recent correction in gold prices to short-term and highly leveraged investors exiting during the decline. This is supported by continued central bank buying, according to Monarch PMS.
The valuation framework used by Monarch PMS shows that gold has moved back towards its fair-value zone after a sharp speculative overshoot earlier this year.