Friday, May 20, 2011

Gold Silver Ratio

Gold and Silver Ratio in History :

The price of silver has been notoriously volatile as it can fluctuate between industrial and store of value demands. At times this can cause wide ranging valuations in the market, creating volatility.

Silver often tracks the gold price due to store of value demands, although the ratio can vary. The gold/silver ratio is often analyzed by traders, investors and buyers. In 1792, the gold/silver ratio was fixed by law in the United States at 1:15, which meant that one troy ounce of gold would buy 15 troy ounces of silver; a ratio of 1:15.5 was enacted in France in 1803. The average gold/silver ratio during the 20th century, however, was 1:47. The lower the ratio/number, the more expensive silver is compared to gold. Conversely the higher the ratio/number, the cheaper silver is compared to gold.
Silver price manipulation is evident in the gold to silver price ratio which should average between 10 and 20. That is, for every ounce of gold, you should be able to buy 10 to 20 ounces of silver.

You can, at the time of recording, buy 78 times the amount of silver than gold for the same money - and yet there is a major silver shortage!

The lenders of Silver are depleting their reserves faster than it is being mined and with the recent downturn - even less mining will occur and even less silver production will eventuate as its price gets close (at some stages below) the cost of production.Silver reserves approaching ZERO. Price explosion must follow!

• Right now it takes 42 ounces of silver to buy 1 oz. of Gold. (42 to 1)

• 700,000,000 ounces of silver was mined in 2009 versus 80,000,000 ounces of gold, which is about a 9 to 1 ratio.

• There was an estimated 40 Billion ounces ever mined of silver versus an estimated 5.3 Billion ounces of gold. That ratio is 7.5 to 1 ratio.

Silver has been consumed as an industrial metal, whereas gold has been cherished as a precious metal forever. As a result, there is still about 5 billion ounces of gold in the world. Silver inventories, on the other hand, have been decimated, with only an estimated 5 billion ounces now above ground. The other 39 billion ounces are in the landfills of the world in amounts too tiny to recover economically at today’s absurdly low silver prices. Maybe if the price of silver rises significantly enough, we will see massive recovery efforts in Staten Island.

•Historically the Silver/Gold Ratio has been 16/1 to 10/1, meaning that silver is presently about 4x undervalued.

•If the total amount of Gold and Silver above ground is equal to 5 billion ounces, that would put the ratio at 1/1. Thus, silver could be viewed as 42x undervalued!

•Total amount of physical Gold and Silver in monetary/bullion form would put the ratio at 1/5, with silver being 230x undervalued. (So the Silver to Gold ratio is 1 to 5–yes, there is less silver bullion above ground than there is gold.)

So if the price of Gold never went up and was based off of Silver market fundamentals, it should find some market balance. At that point you could, in the extreme case, trade your 42 ounces of silver for 210 ounces of gold! (1/5 silver to gold ratio.)
I agree with Mike Maloney that the gold/silver ratio will go well below the historical 16:1 ratio because of the factors that now exist in the world economy, i.e., historic money printing on a global scale and loss of confidence in the world reserve currency which is the US dollar. There has never been global economic conditions like this before and silver will benefit greatly from it. It's the poor man's gold and is much more accessible to the average person.
Roaring 20s brought it down to 16:1
Great Depression, ratio went to 100:1, no significant industrial use
After the post WW2 boom, it went way down, industrial use and electronics
Early 1970s, US off gold standard and individuals could own gold - look how it went up
Hunt Brothers event bottoming it out at 9:1
Then it went back up, over 90:1 during the recession of the 1990s
Dot-com boom sent it under 60:1
Panic of 2008 sent it over 80:1 - deflation, less industry use
Recent stimulus sent it to 60:1
100 years ago, a Ford factory worker made 5 dollars a day, ( 3.87 oz ) of silver in 5 Morgan dollars.

Today, 3.87oz Ag = $116.

Which is an average wage for a skilled worker.

Also, 100 years ago, 5 Morgan dollars had a similar purchasing power as $116 today.

Silver is not in a bubble.
whatever happens silver will skyrocket its demand from industry is unattainable at this lever n it will have to RISE way above what some experts predicted it will

MAKE SURE YOU GET PHYSICAL SILVER IN YOUR OWN POSSESSION. Don't Buy SLV, or Futures or Pooled Accounts or any other BS paper silver product .Remember anything on paper is worth the paper it is written on. Go Long Stay long the bull market have even started yet

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