Some thoughts about gold/silver ratio

[balz]

Lately, I've read some articles about the gold/silver ratio and how it should go back to the "normal" 16X ratio.

I believe we won't see this for some time, as national bank reserves around the globe create artificial gold rarity by stocking thousands of pounds of gold. In nature, gold is about 17 times more rare than silver, but the fact that government are stocking gold and NOT silver contribues to make gold even more rare, hence making the ratio bigger.

I believe the situation will only change when the economic crisis will be so huge that ordinary people will be buying silver.

Then, after that, copper will be the next thing.

Follow the money. Right now it is gold. If you are one step ahead you buy silver too. If you are two steps ahead, you buy copper and other base metals.

My two 98% copper cents.

[silverflake]

balz, good point bringing up the gold/silver ratio. That ratio (somewhere in the 15-17:1 range) is a historic ratio (5000 years old) that indicates the ratio of silver and gold pulled from the ground when mined. In other words for every one ounce of gold that was mined, 16 ounces of silver were pulled out. Now, the amount of gold mined throughout history, within a small margin, is still in existence. mainly because gold was used mostly for jewelry and bullion/coin monetary use so the gold itself was kept, passed on to future generations or exchanged in trade - but never consumed. So the amount of gold ABOVE GROUND still increases every year. OK - silver, on the other hand, not only has monetary and jewelry use, but is an industrial metal too used in all electronics, medicine, photography up until the digital revolution, etc. So most of the silver that has been mined throughout histroy has been CONSUMED -not coming back!!!! It's been a while since I've read the stats but in the early 2000's, the world was consuming more silver per year than was being mined. I'll keep this short - ultimately, silver is still poised to shoot far beyond it's current price levels. If you want the best information on this possible, read the writings of TED BUTLER. He is the Ludwig VonMises of silver investing and got me hooked in the early 2000's. I am surprised his name does not come up more on these boards.
My 2 cents (copper).

[balz]

I agree with you silverflake up to a point. You are right that silver is getting more rare than gold. But my point is that the fact that nations are stockpiling gold and not silver creates artificial rarity. Even if there is less and less silver, there is even less gold on a free market because a large part of it is sleeping in vaults.

However, when the economy will collapse, and unless some miracle can save fiat currency and bring back people confidence in it, people will have to use REAL money for everyday buying. Since gold is too precious, I believe people then will use silver and begin to stock silver, so the ratio may go down at that point.

However, I believe we will never see a 16-17 times ratio anymore. Even historical ratio shows that in 1900 the ratio was already around 30. I believe rich people and what remain of governements will continue to stock gold that will never go back in circulation.

IMHO, we will see a next dip in price (maybe back to 30-35) in the next crisis, then we are heading to 70$+. I'm looking at a ratio of 30 in the future, maybe less if the economics failure is worse.

[neilgin1]

my two cents.....been thinking about this, a week now. Seems like big big entities, players, countries been ramping into gold, and maybe we get a spike up to the 50-ish region. maybe. so i just googled "g/s charts" and found this:

http://goldprice.org/gold-silver-ratio. ... gold_price

its pretty nice, and it taught me something i didnt know, in the 79-80 rally, we DID touch 15 G/S ratio, which we'll probably do again.

[balz]

I think 79-80 is a special case, with the Hunt brothers trying to corner the silver market. I don't think we will see this again. But of course I hope I am wrong.

[Lemon Thrower]

you guys are looking at this wrong.

first, there is more gold above ground than silver. that is a fact. silver is consumed, while gold is not.

so above ground, gold is not more scarce, even though its in vaults.

silver will get to 16 when it is used as money. that process has begun. right now, billionaires and central banks are not buying silver, but they will. Uncle Sam buys half of US silver production to make ASE's.

[silverflake]

Lemonthrower - excellent point about scarcity of silver vs. gold. I think I tried to make that point in my post above but I ramble a lot. An argument for a much higher price of silver is the fact that it is more scarce than gold because of silver consumption and gold preservation. Check out how few pure silver mining companies there are. I tell ya, whether TSHTF or not, the gold/silver ratio is coming down.
Keep stacking gang.

[balz]

Gold preservation has no negative impact on gold if gold is not traded. If all that gold was in circulation, we would see a 16-17 times ratio IMO.

[Mossy]

An argument for a much higher price of silver is the fact that it is more scarce than gold because of silver consumption and gold preservation.

"As well as".

The gold placer deposits under Folsom Reservoir were never really worked, and the mountains behind Juneau Alaska are gold ore. Several jewelry veins were discovered when the dug the Snetisham tunnels for hydro power generation. Lots of gold around, known deposits.

[shinnosuke]

An argument for a much higher price of silver is the fact that it is more scarce than gold because of silver consumption and gold preservation.

"As well as".

The gold placer deposits under Folsom Reservoir were never really worked, and the mountains behind Juneau Alaska are gold ore. Several jewelry veins were discovered when the dug the Snetisham tunnels for hydro power generation. Lots of gold around, known deposits.

Surely the price of gold is high enough now to interest some companies to start mining in those locations? No? Perhaps you will tell me that I don't see the big picture. Please illuminate my mind.

[iluc]

The most conservative way to look at it is just to simply use the total amount that has been mined throughout history. My numbers are not in front of me (and obviously it's fraught with assumptions and estimates), but it comes to about 93% silver, 7% gold (proportion of above-ground ounces), which is close to a 12-13 ratio. For a long time now, there's only been about 10 times as much silver coming out of the ground each year. That has nothing to say about how readily accessible all that inventory actually is, just how much there is. It will be a fascinating, hallmark announcement when we hear about a central bank trying to build a silver reserve.

75% of my investments are silver for a reason. Could I be so lucky as to see that ratio snap shut and still have Pennies and Nickels readily available for face?

[Mossy]

Surely the price of gold is high enough now to interest some companies to start mining in those locations? No? Perhaps you will tell me that I don't see the big picture. Please illuminate my mind.

Condo-conservationists. "Equal Access to Justice Act" is used to pay legal fees for people who sue the EPA and prevail. The EPA is run by rabid greenies who promptly take a dive whenever they are sued so those who bring suit get paid and the EPA is "forced" to do what the rabid greenies want to do in the first place, but could not because Congress had not told them to.