The Price Of Silver Seen Through The Gold/Silver Price Ratio

Investors are watching closely as the price of silver is trying to hold the $20.5 an ounce resistance point. It is very crucial that it does as this will largely reinstate silver’s position as a long term hedge against any upcoming economic crises.

What you want from an investment is a lot different than what you want from a hedge. With an investment, you need something that is stable, hopefully provides a yield, and isn’t going to drive you crazy with volatility. So far, silver is none of these things, but it is a perfect hedge because when things go wrong economically  the price of silver goes through the roof.

Price of silver connected to the price of gold

Seen as an investment, silver has been closely associated with gold, especially when used as leverage to soaring gold prices. The two metals are found to follow the same long term trend, so the gold/silver price ratio is a precious indicator that helps analysts determine the most likely direction silver prices are heading.

Historically, the price of gold has been around 16 times the price of silver in times of economic crises. The ratio returned to its historic range during World War I (100 years ago) and again in the early 1970s, when Nixon abandoned the gold standard. It also happened in 1979-1980, when gold briefly soared to $800 an ounce and it seemed as if America was really entering a severe money crisis: in 1980, silver prices rose to a height of $48.70 per oz. from their regular price of $5/oz.

Gold/Silver ratio suggests much higher future price of silver

The price ratio of gold to silver has fallen precipitously in bull markets for the metals, which means that the silver price could have an upwards move at four times the rate of any gold price increase.

On Wednesday, September 30, 2009 gold closed at $ 1,008 and silver at $16.636 per ounce with a 62,5 ratio while on Wednesday, December 23 of the same year gold closed at $ 1093.30 and silver at $17.175 per ounce with a 63.66 ratio.

All time high prices of gold and silver in 2011 had a ratio around 40, while for 2013 bottom prices the ratio was 63.

Gold/Silver ratio suggests much higher future price of silver

Based on the long-term historical average ratio, with the price of gold around $1,350, the price of silver should be around $84. It’s not, of course, it’s around $20.5 with a ratio of almost 66, which influences the silver-to-gold ratio heavily in silver’s favor. Further widening of this ratio is almost impossible, while a short term reaction towards a ratio close to 60 would be a rational move to the right direction.

Given this perspective, silver prices are going much, much higher in the following years, and it’s still a great idea to hedge your portfolio from the currency risks that most experts believe are very real. You can do so easily and safely by choosing a reputable seller such as and taking a position in silver today.

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