DewsDones934
Silver Investing - The Gold-To-Silver Price Ratio, And Why It Will Go back to Its Historic Standard
As silver made its last increase to $50 an ounce in early 2011, it appears someone posted an article every week concerning the gold to silver price ratio. The gold-to-silver price ratio dropped to about 30:1 in those days. It had been a lot more than double that little more than a year earlier.
I recall only a couple of articles concerning the ratio previously year, and also the suggestion was that at about a 50:1 gold-to-silver price ratio, the time had come for silver investors to once more buy silver. Personally, I believe the ratio goes considerably higher before it moves considerably lower. Why?
In a nutshell, with 50% of the annual manufacture of silver being consumed by industrial demand, and signs of slowing economic activity worldwide, I believe the price of silver will drop even while the buying price of gold rises. Next, or maybe simultaneously, inflation sends the buying price of gold skyward. If I am correct concerning the magnitude of the price moves, the gold-to-silver price ratio will move much higher than 50:1, maybe up to 100:1 during this time period of time.
Once the price of gold reaches levels most will consider outrageously high and unsustainable, most of the middle-class around the globe will use silver to safeguard their eroding assets value from the ravages of inflation. This is actually the time period when the gold-to-silver price ratio will start moving lower, toward its longtime historical levels.
Why will it move back to the 17:1 range? Because price manipulation will cease, or possibly due to supply/demand forces? Those activities will contribute, but they won't be enough. As an example, consider the platinum-to-gold price ratio. It is now under one; that's; the buying price of platinum is less than the price of gold. And platinum is 30 times more scarce than gold. Why isn't the price of platinum 30 times greater than the price of gold? By the way, though the price of platinum was greater than that of gold for several years, it had been never even double, a smaller amount thirty time the buying price of gold.
The short response is that platinum doesn't, and will not possess the huge investment demand that gold does. Although platinum is recognized as a rare metal because of price, it is a commodity, a commercial metal.
Silver includes a history of being regarded as a rare metal. And even though it is much more of a commercial metal than gold, investor demand will jump-start the ratio downward. When that point comes, there'll once more be articles about the gold-to-silver price ratio. A lot of reasons is going to be cited to convince investors the ratio will revert towards the historic norm. But it's not the reasons themselves which will make the long-term ratio to achieved.
It is the citing of those reasons, and convincing the investors that it's inevitable. Using the cost of gold within the thousands, and silver in the low hundreds, it will be the expectation that the historic ratio will be achieved that will keep investors buying silver until it does. With so little physical silver, left (over 90% ever mined is finished forever), it won't take many believing investors to make it happen.
