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Gold to Silver ratio, will the gap narrow?

Friday, August 31, 2012

As the silver price continues to make gains this week, investors and experts are speculating over the future of the gold to silver ratio.

The silver to gold price ratio has seen huge variations over the years, from as little as 15/1 to as high as 93/1 in the early 90's. Historically the price ratio of the two precious metals have moved in tandem, albeit at a staggered ratio. But, with that ratio currently hovering around 54.47, the pressure is now on to see which metal will move to close the gap – Do the recent gains in the silver price suggest it may be time to buy silver?

A recent report from RapidTrends stated, “The clear lesson from history is that we can expect silver to drop faster than gold during a recession, and silver will rise faster than gold during a bull market in the metals. The simple application of this observation is to trade silver for gold in the middle of a recession, when a bull market in gold and silver is about to start, and to trade gold for silver at the top of a bull market in precious metals.”

See more historic Silver Price charts at www.goldprice.org/gold-silver-ratio.html.

But surely, it is supply, not demand, which will have the biggest long-term impact on the ratio? While Jefferson Lab reports that silver is almost 19 times more abundant in the Earth’s crust than gold, a contribution to Seeking Alpha, suggests it is reserves and production which are more likely to give us a clearer indication of physical availability. According to US Geological Survey’s Mineral Commodity Summaries, 2011 reserves and production for silver was respectively ten and nine times as abundant than gold.

In spite of silver’s availability, demand for gold, as always, holds strong. “Demand for gold is very strong, especially at the investment level.” reported RapidTrends. “Reports of shortages of coins and small bars have come in from all over the globe. Several Mints have stopped taking orders and other mints are working overtime to fill orders. Dealers are paying a premium over bullion value in order to replace stock they sold earlier.”

To check live prices for gold and silver, and to buy gold or silver bullion or coins, visit our live silver price and live gold price charts. The Gold Bullion Company hold good stock of investment grade 1kg and 5 Kilogram Silver Bars available to purchase direct online.