Is the ratio between gold and silver out of whack?

TahoeDale

If there has been a close relationship between these 2 metals in the past, what has that ratio been?

Are not we increasing the total number of ounces of gold, and reducing the amount of silver(by industrial use)?

Does anyone know the market capitalization of the known gold produced and now in bullion/coin form? The same for silver? ie., the amount in ounces times the present spot price.

I am not taking a postion on the price (elevated recently) of gold, but why isn't silver going up more than it is?

ahooka454

very good question tahoedale.

i think silver is way under where it will be or should be.
anyone that knows what you ask will have all ears from me...

CaptHenway

The free market says that the ratio is whatever it is.
TD

291fifth

Gold and silver are commodities and sell for whatever the market dictates.

cladking

The free market is responding much more to fear in the financial sector
than of inflation. Gold is a far better hedge for inflation and insurance
against calamity than is silver.

When the market expects recovery oil is up sharply to reflect increasing
demand and silver is up. Otherwise gold is propelled higher and silver
languishes. This will continue until a trend is established which will pro-
bably mean a recovery is coming.

The value of the gold in the world outweighs the value of silver by about
60: 1. Most of the gold is in huge stockpiles and most of the silver is wide-
ly dispersed with no appreciable stockpile.

Dawg144

I think it might have to do with how much the world's standard of living has (for the most part) increased in the past century or so. Prior to 1850 (not sure about the date, maybe 1800), many people never saw gold coins in their entire lifetimes, and had to use silver as the standard for currency. In fact, China, one of the wealthiest states in the world, was a huge absorber of silver from abroad and created a massive market for it. Gold has always been seen as a much more liquid commodity to hold; it was just that very few people could afford it. But since the Industrial Revolution, and more so nowadays, almost everyone has some kind of gold stockpiled, like gold jewelry. The central bank of China is now sucking up as much gold as it can. Because gold is a much better accepted commodity than silver, the ratio has been distorted.

The demand for gold is definitely not correlated with any change in rarity. Platinum is 15-30 times rarer than gold, but only double the price. Is the ratio between these metals out of whack? Definitely, unless you consider that gold is a much more popular and internationally accepted store of value than platinum. And I believe the analysis is quite similar in terms of silver. JMO

cladking

<< <i>

The demand for gold is definitely not correlated with any change in rarity. Platinum is 15-30 times rarer than gold, but only double the price. Is the ratio between these metals out of whack? Definitely, unless you consider that gold is a much more popular and internationally accepted store of value than platinum. And I believe the analysis is quite similar in terms of silver. JMO >>




Of course value is purely perception and the stability as a "store of value" is
based on this. The amount of gold increases every year and this could affect
the perception of the value. It, no doubt, already is factored into the price and
its value as insurance and inflation hedge are working in the other direction.

IrishMike

No the ratio isn't out of whack. The current ratio is market driven versus a geological ratio of 6.33.

StampAlarm

<< <i>The free market says that the ratio is whatever it is.
TD >>





With a VAT of 15% plus placed on silver bullion and silver bullion related coins in the EU
then I'd say the ratio where it is now makes sense.

Europeans are free to buy silver, but with a 15% VAT plus on top I'd say the majority, if
not all the populace of the EU who would like to buy silver are sitting on the sidelines.

"The free market..." for silver has a severe restriction on it.

I've had a few very enlighting email exchanges with people at the Silver Institute, Silver Investor,
and the FT of London. Here's a few responses I received:

"...the VAT on silver bullion has certainly acted as a disincentive for small retail investors in Europe
to buy physical."

"If we are to see a massive expansion in interest from the retail side in precious metals, the VAT might
indeed lead to this expansion being asymmetric between gold and silver..."

"We will be working with our European counterparts in 2008 to educate the leaders in EU that this is
a bad tax..."



Jerry

Gi

I think this may be of interest
600 years of silver

pb2y

You push the in-velop to far

Gi

Notice ratio lines crossing (about 2 to1) near 1900 (paper money regularly accepted) 1920,s (no privet gold in US) early 80,s (oil and inflation, help from the Hunts)What's it mean? I don't know but thats 3 times in recent history.

roadrunner

The free market says that the ratio is whatever it is

An awful big leap of faith to assume the metal's markets (esp silver) are anything close to "free."


roadrunner

DoubleEagle59

I don't think the ratio is 'out of whack'.

It is what it is (dictated by market conditions and events).

I do feel however, that going forward silver will appreciate more than gold, thereby reducing the gold/silver ratio.

Another way to look at it....if I was going to buy either gold or silver, right now, I would definitely buy Silver.

ProofCollection

Once gold really takes off. I mean, really, really takes off like $2000+, silver will take off as an "affordable" alternative. Then watch silver go to $100+

StampAlarm

Silver is no longer a precious metal.


It is now a precious meddle.

droopyd

16-to-1 is the historical ratio, I'd expect long-term that we'll see somewhere in that neighborhood again.

StampAlarm

<< <i>16-to-1 is the historical ratio, I'd expect long-term that we'll see somewhere in that neighborhood again. >>





How? By the EU placing a VAT on gold bullion and gold bullion related coins?

relicsncoins

The ratio may have been true when both metals were used primarily for currency/jewelry. However, now there are many industrial uses for both metals which has a large effect on the price of both individually.

Silver was used exetensivley in the manufacture of camera film. With the advent of digital photography this demand has had to have gone down considerably.......just one example.

JJ

fastrudy

16-to-1 is the historical ratio

How was this determined?
Is it a Biblical reference? If so, it has no modern significance.
Is it the yearly average of the gold price compared to the yearly average of silver price averaged over 600 or 1000 years? If so, it has no modern significance.

There is no economic or natural law which would require gold/silver ratio to be a particular value. Many economists like to run this figure up the flagpole, as it is vague enough to be important to their porous theories of future market movements.

"If you took all of the economists in the world, and laid them end-to-end, they still would not reach a conclusion"

A Nobel Prize winner in Economics had three years of better-than-average results before his theory catastophically collapsed. Nova made a program about it called, "The Trillion Dollar Bet". You can google it to find out more.

Edited to correct name of Nova program.