I'm reading all this news about the ratio Gold to Silver is way out of wack...
mrpaseo
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Everyone is saying that Silver is way under valued due to the history ratio.... but what if it's the other way around... What if Silver is right and Gold is way over valued and the eventual correction is going to be Gold falling back to the correct "Norm" ratio.
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My belief that silver has more upside potential than gold is not based on historic ratios. It is based on what I see as differences in the supply/demand fundamentals.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>My belief that silver has more upside potential than gold is not based on historic ratios. It is based on what I see as differences in the supply/demand fundamentals. >>
I agree that Silver has potential, I would not mind seeing it dip a little to let me get in at a lower dollar cost average over the next year or so before it hikes up to $100 per toz.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>I still like gold !!!
No doubt, the feeling is mutual
In centuries past the ratio was extremely high as silver was still being discovered.
But the bottom line is that previously huge silver stockpiles have been drawn down to near zero. Silver is still getting used faster than its mined. And while
geologists might say that theoretical silver to gold ratio in the earth's crust runs at 25-1 the fact remains that for decades now, the miners are producing silver vs. gold
at a 9-1 ratio. It really doesn't matter what's in the crust or what it was in decades or centuries past. Today, and for several decades past, it's been coming out of the
ground at a 9-1 ratio to gold. This means that the current price ratio of 56-1 should eventually work it's way down to 9-1 over years/decades assuming that silver continues to
be an in-demand industrial metal that gets used up faster than it can be mined. The silver to gold price ratio is totally out of whack compared to what is being mined. And if one
looks at trading volumes in London and NY over the past years, that ratio is also in the 10-1 range.
For 500 years the Gold to Silver price ratio stayed in the teens. It wasn't until the mid-19th century where it first went above 20-1. It peaked in 1939 at 153-1 due to the huge
volumes of silver available from all the mining of the previous 100 yrs. Most of that volume is now used up. I think there will be a slow descent over time from the current levels
of 56 towards 9.
I've been struggling lately with this ratio.
It seems nowadays a ratio of 55:1 is about the norm.
30:1 being low and 80:1 being high.
For this reason, I'd hold an equal weighted value of gold and silver.
At 80:1 then swap gold for silver and at 30:1 swap silver for gold. (whichever comes first)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Groucho Marx
<< <i>My reply from another thread tonight on the same topic......
I've been struggling lately with this ratio.
It seems nowadays a ratio of 55:1 is about the norm.
30:1 being low and 80:1 being high.
For this reason, I'd hold an equal weighted value of gold and silver.
At 80:1 then swap gold for silver and at 30:1 swap silver for gold. (whichever comes first) >>
I think this was the post that provoked this thread
Ray
<< <i>
<< <i>I still like gold !!!
No doubt, the feeling is mutual
one of the demand fundamentals I was referring to.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
How about platinum? Isn't it 10x more rare than gold? So it should be 10x higher right?
Since gold and silver have been allowed to trade relatively freely, the ratio has been about 60-1. Seems to me everything is in order.
Knowledge is the enemy of fear
I knew it would happen.
I would like to see the ratio change drastically in silver's favor, but it hasn't. With all the past climb and hype and even supply amounts, it hasn't. So I'm not expecting any big change under the current circumstances. As more people become aware, and more people buy (maybe because of fiat or doomsday worries), and supply slowly lessens, maybe that will boost the demand.
A slow creep over 10 years or so for a better ratio.
Under last 6 months circumstances, or even right now with the questions about golds future and the current dip, it hasn't spun off a better silver ratio.
So I think it may need something unique or bigger to make a drastic change. Although that does happen. Maybe if the market crashes, more will move to silver as an affordable safety net.
If you look at the gold/silver charts overlapping, you'll see there is something driving them through swings in a very parallel manner.... I think that something has more control over the ratio then supply/demand.