The Evolving Relationship between Gold and Silver 1978-2002: Evidence from a Dynamic Cointegration Analysis: A Note

Traditionally, analysts and traders have expected to see a stable, reasonably predictable, relationship between the price (and thus the rate of return) of gold and silver. Both these metals retain important industrial, commercial and investment uses. Recent research has cast some doubt on this assumption. We find that while over the 1990's the relationship may well have been more unstable, when a longer timeframe is examined the relationship is stable but weakening. This we hypothesize is due to the changing nature of the demand patterns for gold versus silver.