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<p>[QUOTE=&quot;gboulton, post: 1247890, member: 27043&quot;]My own unprofessional opinion...&nbsp; *heh*</p><p><br /></p><p>The gold:silver ratio is bunk.</p><p><br /></p><p>There are 2 reasons for this:</p><p><br /></p><p>1) The first argument for using the GSR as a means of predicting/analyzing gold and/or silver prices is that the ratio has &quot;historically&quot; been within a certain range.&nbsp; The argument suggests that since the GSR is historically X:Y, it is safe to presume that it &quot;naturally&quot; wants to be back there, and that the market will try to correct to that point.</p><p><br /></p><p>The presumption here, of course, is that the market for these metals has remained stable and unchanged...in other words, that things are as they always have been.&nbsp; There are 2 flaws with this.</p><p><br /></p><p>First, clearly this isn&#039;t so.&nbsp; Gold and silver have performed remarkably differently the past 8-10 years than they did in the 100 years prior to that.&nbsp; So...if one considers an 8-10 year run to be indicative of market movement, then &quot;things are different&quot;....and relying on old ratios and behaviour is foolish.</p><p><br /></p><p>Of course..perhaps you believe that an 8-10 year trend is NOT significant.&nbsp; Perhaps you are a longer term investor who believes that 8 years out of 50 or 100 is not significant.&nbsp; If that&#039;s the case, then why are you investing in gold/silver at all, or concerned with their ratio?&nbsp; Historically, except for that recent period of time, they are POOR investments.</p><p><br /></p><p>In other words...the only situation that makes the gold:silver ratio worth studying is the one that makes it meaningless. <img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie1" alt=":)" unselectable="on" unselectable="on" /></p><p><br /></p><p>2) Let us presume, however, for a moment that the GSR is worth studying for whatever reason.&nbsp; Ok, fine.&nbsp; The argument is STILL predicated on the situation remaining relatively static.</p><p><br /></p><p>That INCLUDES demand for both the metals.</p><p><br /></p><p>This isn&#039;t to say that demand for silver must be what it was 10, 25, or 50 years ago...but rather the RATIO of demand for silver : demand for gold must have remained the same.</p><p><br /></p><p>This clearly isn&#039;t the case.&nbsp; Photography, a historically high demand for silver, is a fraction of what it was 25 years ago, as film has become (sadly, in the minds of some) a relic of a bygone age.&nbsp; By the same token, every day, a new use for silver is found in medicine, and electronics demand has skyrocketed since 1975.</p><p><br /></p><p>In a related way, we must also presume that the ability to mine/produce/recover both metals has remained relatively static, as a ratio.</p><p><br /></p><p>Put another way, the price of both metals is some function of supply and demand.&nbsp; To presume, then, that the PRICE of two metals must maintain a consistent ratio presumes that both the supply AND demand of both has maintained a consistent ratio.</p><p><br /></p><p>=============</p><p><br /></p><p>Finally, if ALL of that is bunk, and there really is some magical ratio gold and silver seek to achieve...</p><p><br /></p><p>How do we know that the signal isn&#039;t a HUGE SELL for gold?&nbsp; <img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie2" alt=";)" unselectable="on" unselectable="on" />[/QUOTE]</p><p><br /></p>

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