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<p>[QUOTE=&quot;John the Jute, post: 600405, member: 17740&quot;]The five years were 1998, 1999, 2000, 2006 &amp; 2007.</p><p>&nbsp;</p><p>What was happening before: the economy was booming/in a bubble. The high relative price for silver continued into 2008: the gold/silver ratio didn&#039;t drop below 60 until mid-August.</p><p>&nbsp;</p><p>What happened afterwards: the dot.com bubble and the sub-prime bubble burst ... and the economy tanked</p><p>&nbsp;</p><p>&lt;goldbug mode on&gt;</p><p>&nbsp;</p><p>This evidence confirms, to some extent, the goldbug thesis that silver is at least partly an industrial metal nowadays, and does well when the economy does well. As such it is an excellent hedge against inflation ... better even than gold.</p><p>&nbsp;</p><p>Platinum is much the same.</p><p>&nbsp;</p><p>If, however, we have deflation you need gold rather than either of these.</p><p>&nbsp;</p><p>The gold/silver ratio rose to very high levels a while back; and the price of platinum fell below that of gold. To a goldbug theorist, both of these implied that the market expected deflation. Very worrying.</p><p>&nbsp;</p><p>Mr Brown in the UK and Mr Obama in the US have since announced their plans to increase the money supply. The subsequent drop in the gold/silver ratio and the surge in the price of platinum imply that we shall avoid deflation ... at the cost of having inflation in a few years&#039; time.</p><p>&nbsp;</p><p>If you believe that Messrs Brown and Obama will successfully switch from encouraging inflation to discouraging it--exactly at the right time and in exactly the right amount--then you have no need for precious metals as a hedge.</p><p>&nbsp;</p><p>&lt;goldbug mode off&gt;</p><p>&nbsp;</p><p>Later,</p><p>&nbsp;</p><p>John[/QUOTE]</p><p><br /></p>

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