## Dust flux, Vostok ice core

Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

## Monday, January 23, 2012

### A critical year ahead for silver

Below I have the two-dimensional reconstructed phase space portrait for the gold-silver ratio with a one-year lag. I have actually calculated the three-point moving average of the ratio to smooth out some of the noise.

The last point labelled here is 1111 (November 2011), because the last available month-end close is December; in the convention I have been using, I plot the three-point moving average in the middle of the last three months, which is November. I appreciate that this is not the way everyone does it, particularly TA specialists, but this convention is a reflection of my background.

Recall that this plot is generated by plotting the current value of the 3-pt mav against a lagged value--in this graph, I have used a lag of one year, so the 3 pt mav is plotted against that from one year previously. This means that we already know something of how this graph is going to unfold over the next year--the values on the ordinate are going to fall to about 38 in the next six months, and then return to approximately the present value near 52 within 12 months. We don't know whether that will be a move straight down and straight back up (which would happen if the gold-silver ratio stayed near its present value over that period), or deflect towards either the left or the right in that time frame.

If the gold-silver ratio rises in the next year; or if it stays near its present value, then the state will return to the region of phase space that has dominated the system for at least fifteen years. That would seem to imply a long wait (years, perhaps?) before seeing a major improvement in the silver price with respect to gold.

If, on the other hand the gold-silver ratio declines to at least 40 (or less) over the next six months and holds that through the year, then the phase space will trace out a large arc to the left of the area occupied over the last fifteen years, which I would then view as strong evidence that the dynamics of the gold-silver ratio had changed in silver's favour.

If silver is to outperform gold, that is the scenario we have to see. For that ratio to hold, if gold stays in the \$1600-\$1900 range over the next year, then silver has to rise to nearly \$50. Failing that, it could be a long wait for silver.