uthminsta wrote:b]Using the current spot price of copper:[/b]
Gold $204.29/Toz
Silver $14.31/Toz
Copper $3.68/lb ($0.23/oz)
What SHOULD the ratios be? Consider this: if those ratios were fixed, we would only need ONE spot price.
Given the advancements in mining/refining technology which makes modern day copper cheaper to produce (it's the most expensive in terms of work necessary to equal the same reward), I'd say the copper example would be the most appropriate.
That's in the absence of hoarding, however. Central banks simply don't care how much they have to pay for their gold hoards, because they print the money to pay for it...but they do have to be careful not to make copper too valuable for fear of crashing the economy.
Some would argue that $200 gold is below the cost of production, but in the absence of hoarding, a $1,667,000,000 dollar mine would likely become a $204,000,000 mine. As the cost of entry goes down, so does the debt service, expected profit, and overall cost of production.
That's just a mental exercise, however. Once you include hoarding of Au by the wealthy and Ag by the commoners, prices bubble up just like they did with real estate. To get a true feel for where they should be, it's probably best to compare metals pricing with food, fuel, wages, and housing.
Using a gold/house ratio of 150oz/house, gold should be around $1K.
Using a gas/silver ratio of 1 gal/quarter, 90% silver should be around 12x face.
...but these are VERY uncertain times, and I'm more comfortable leaving my money in technically overvalued PMs than rapidly depreciating fiat. With the current gold/house ratio well under 100:1, a country house on a couple acres is looking better every day.