Why is Silver Priced at its Price and Gold at its Price

Why is gold $1000+ dollars and silver under $20.

Is it scarcity?

Perception of value?

I always thought about how the metals got their respective prices.

 

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supply and demand. ask chinese and indian. the most populous countries on earth. almost 99% like gold.

 

supply and demand. Funny what an open market can do at times.

 

It has been crawling up anyway, but add the fact that our dollar value is diminishing, Chinese have ordered record amounts of gold, oil and gas will quit trading based upon the USD.

 

let's go deeper into supply and demand. why is there more supply for gold > silver?

 

I've often wondered the same seems like Silver has so much more physical demand for industrial usage but I would assume just means there's plenty more of it keeping prices low. Seems as though prices have been rising based on the week dollar. Will the U.S. Gov step in again and push the dollar higher to try and slow the rising prices? It's not a supply issue is it wouldn't supply and demand level off as those holding for a period of time sell off to profit as new investors come in?

 

BNB, Look out for some of the geological reasons as well as the economic ones and how they affect one another. Here's a piece you can read quickly from the Mineweb site published earlier this year about scarcity and supply of gold and silver, etc. It may offer you some ideas. Of course the interview covers other related topics but there's some scope there for you.

 

There's no shortage of silver in the ground. It's even a byproduct of the mining of other materials like copper. Many mines aren't operating because the silver price has been so low for so long, that it simply isn't profitable. If they were all in operation, there'd be so much silver that the price would probably become depressed again. Apparently, there's quite a bit more silver in the ground than gold. It's always there for the mining...not the case with gold. There are various industrial uses for both metals. Folks like their gold jewelry, and that accounts for a large portion of above ground gold.

 

It's a good question. Gold inventories are larger than silver, with about 5billion ounces of gold and 1billion ounces of silver in above ground storage. Silver has more industrial uses than gold. Silver is more highly shorted than gold in the futures market. There are more primary gold mines than primary silver mines.

Silver has enormous price potential.

 

Silver recycling rate is much higher as well whereas people just hoard gold in bank vaults or in their room.

 

Isn't it the egyptians that said the natural settled ratio for silver/gold is 13.3:1?

Aren't we somewhere around 60:1 silver to gold ratio now?

What would it take for silver to go 35:1 or 25:1? Just throwing numbers out there...

I think both silver and gold are beautiful. Got some silver bars last week and can't stop looking at them.

Funny though, I'm not a jewelry kind of guy at all. Can't stand gold necklaces or silver bracelets etc...but when in bullion/bar form, they are so awesome!

 

You are correct, but historical production is irrelevant to the market price and above ground inventories are not really misleading at all to someone deciding which to buy. If industrial users and investors create a demand for silver much greater than CURRENT inventories plus production, the price will rise regardless of how much silver was mined historically because most of it is gone. Above ground inventories and annual production are the key. Even your numbers suggest much higher silver prices with a 7.5:1 ratio. I don't believe it will get to that point, but the pieces are in place for the change in silver prices to far outpace gold.

 

so what do you think the the closest silver/gold ratio will be? and what will gold's price be?

 

I have no idea, and I'd be lying if I said I knew or had any analysis that claimed to be able to measure it. But we seem to be in the middle of a bull market in commodities in general. So I expect gold to continue to rise, probably with scary drops along the way up, and silver to rise a lot more on a percentage basis because there is so little of it dollar-wise compared to gold. Someone else published an article with a guesstimate of $5400 for gold. Most people discounted this, but it isn't an outrageous long term guess for the peak under the present circumstances [although the price will probably fall by half from whatever peak it hits]. Bull markets almost always go higher and longer than anybody expects. If the silver/gold ratio got to 1:20, I'd be inclined to start swapping silver for gold. If gold prices went really parabolic [and I don't mean $20 moves per day but $100 per day], I'll really be hunting for some excuse to sell and move the money into something else.

For me, it's enough to know that the direction is still up for now. You don't have to know when or what the peak will be. And please don't take my word for this. I'm just sharing my best analysis of the situation which may turn out to be right or wrong. Everyone has to think for themselves and be responsible for their own decisions.

 

Supposedly there isn't. Gold there is about 5 billion ounces above ground. For silver it is about 1 billion. At least that is what Theodore Butler says.

 

A Historical view of the Gold to Silver Ratio...

In todays world it just rather floats...but this is interesting to see over recorded time.

•2007 – For the year, the gold-silver ratio averaged 51.
•1991 – When silver hit its lows, the ratio peaked at 100.
•1980 – At the time of the last great surge in gold and silver, the ratio stood at 17.
•End of 19th Century – The nearly universal, fixed ratio of 15 came to a close with the end of the bi-metallism era.
•Roman Empire – The ratio was set at 12.
•323 B.C. – The ratio stood at 12.5 upon the death of Alexander the Great.


RickieB

 

I assume you wouldn't want to hold onto your USD for too long when you cash out your PM's right? Would you invest them in foreign currencies?

I've always thought about this myself. I would definitely pay down my mortgage as much as possible. That way I don't have to worry about investing overseas although that does sound kinda fun.

I know some people are saying not to invest in yet another fiat currency but it's really not so bad if the currency's value soars, then you can cash out as well.

At the end of the day, unless the US introduces a new currency, we still have to deal with USD.

 

Normally it from investor that are cash in there metal IRA's Sept-Dec.
**but this year it maybe our economist that are reporting no new gold or silver mines & China buy every bit of gold or silver on the market