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Revisiting The Silver/Gold Ratio

Pile of gold bars

Silver is much less common above ground than gold.

Silver has traded far below its historical average relative to gold for over 50 years.

The futures market for silver dwarfs the physical market by a factor of more than 500 and adversely affects economic price discovery.

Silver demand is set to surge going forward and the world’s mines already cannot produce enough silver to meet demand.

Silver will likely outperform gold going forward and this will reduce the price ratio between the two metals.

I recently read an article by fellow investment analyst and author Steven Saville over at TalkMarkets entitled, "What Should the Gold/Silver Ratio Be?" In this article, Mr. Saville attempted to make the point that the historical relationship of sixteen ounces of silver to one ounce of gold, which is the average at which it was at for a significant portion of human history, is in fact much too high. Instead, Mr. Saville argues that the 45-60 ounces of silver to one ounce of gold, which is approximately where the ratio has been for the past fifty years, should now be considered normal and should be what investors expect going forward. Read more here