Silver has a Golden Secret: a magical ratio which has been around since Egypt, Rome and before modern countries and currencies existed. Learn the code and prosper.
The case for silver:
Geologists know there is 17x as much silver in the earth’s crust as gold. If silver is 1/17th as scarce, it should theoretically be 1/17th as valuable as gold. Historically, it often has been priced at a 17:1 ratio. Right now, the ratio has gone nuts.
Ancient Romans fixed the price of gold vs silver at 15:1, thousands of years ago, before there were geologists, and before there even was an AD or CE after the date.
The gold/silver ratio was fixed at 15.5:1 by European law in the 1700’s, and by the USA in the 1800’s, and held true up until the 1840’s, when people went crazy.
The famous 1850’s “Gold Rush” saw people get “gold fever”, gold prices increase rapidly and silver lag behind. The long-running 15:1 ratio became 20, and then 30 as gold became seen as more ‘trendy’ than its cousin.
The gold/silver ratio was out of alignment even leading into WW2, with the gold/silver ratio peaking at 97:1 in 1940 as Nazis and Allies sought to accumulate as much gold as possible.
When you stretch a rubber band too far, it has to snap back. After WW2 ended, the gold/silver ratio dropped back to the more normal historical territory. Gold prices scarcely moved by more than a couple of dollars over the next 30 years, whilst silver prices went up over 470%
When the USA dropped the gold standard in 1971, the next decade saw $US fall in value at the same time as gold was in demand. Gold prices rose 1700% and silver lagged a little, increasing around 1000% in less than 10 years.
Heading into the 1990’s (a decade of high interest rates), gold prices dropped almost 50% and silver dropped further, around 75%. Cash was king, but with silver dropping far more than gold, the old ratio was out of alignment; once more over 90:1.
Gold prices dropped steadily whilst silver stayed firm. It took gold almost 13 years to go back to its previous highs. From 1990 to 2003, gold went backward whilst silver piled on 20%. The long-running ratio was proving itself once more.
Although gold prices picked up 240% during the lead-up to the GFC, silver piled on more than 300% over the same period. The gold/silver ratio had dropped from 90+ to just 58; and by 2011, to 44.
In 2019, with Trade Wars, negative interest rates, fears of hyperinflation in the west and inverted bond yields, gold has risen to new highs, and receives a lot of media attention.
What the news fails to tell you, is that the ratio is again nudging 90:1, and it may not stay there long.
Mark Twain said, “History may not repeat, but it definitely echoes“. The last few times that the gold/silver ratio nudged north of ninety, it has dropped back to 50 or below within a couple of years.
To get back into ‘the zone’, one of two things would need to occur:
1) gold prices would have to drop by half from current levels (which is very unlikely), or 2) silver prices would have to double.
I am not saying that the current silver price of $27 per ounce will again hit or exceed $49 per ounce (like it did on April 29th, 2011), but do not be surprised if the ratio which has been around for over 6000 years, still holds true in a modern world filled with lies and politics.
It’s hard to argue with historical precedent, and it’s impossible to argue with geology 🙂