The POS silver in my humble opinion along with the POG was/is always going to come back to the long term trendline which for the POG corresponds with the 200 DMA. I really don't believe any of us have to be guru technical analysts to see that.
Interestingly from late in the 18th century to present day the Ag-Au ratio has varied from 15:1 (1876) up to 97:1 (1940) & 94:1 (1990). Presently the ratio is approx 42:1 with both the POG & the POS at near record levels.
If we were to come back to the present long term trend the ratio would be 53:1.
Using the long term average taken from 1791 - 2011 the ratio is interestingly 52:1 (almost identical to the long term TA trend).
So it begs the question that if the POG were to reach the dizzy heights as suggested by some on this forum what would the POS be at the above ratio?
It starts to paint a picture that is totally unrealistic in my humble opinion AND I maintain that not only is the POG in a bubble (figuratively speaking) indicating that current pricing is unsustainable.
I also subscribe to the view that developed and developing nations in particular China, may indeed have much larger reserves of gold that aren't "accounted" for and this could have a significant impact on the open market when they or any other large holder decides to reduce their holdings.
I believe the present state if play may be sort of a "no you go first" scenario so when one large holder starts offloading it's going to create a substantial cascading effect on the prices of both these particular commodities.
