When All Else Fails

Reflecting on Silver

“The ah in ag”

by David Morgan, Gold-Eagle

It’s a fact. Gold investors believe in gold under any economic condition, but they aren’t so sure about silver. Gold, they insist, is valuable and in fact undervalued. Their argument is basically that gold did well during the last Depression and silver only sold at twenty-five cents an ounce. This truth and their bias is only partially accurate as we investigate which of these two metals truly is the most undervalued.

If you relate silver to gold, the first thing that you note is the value ratio. For thousands of years, the ratio was generally 16:1 or lower. That assumption was the low for silver, not the high. In the year 200, you could buy an ounce of gold with only 10 ounces of silver. In 3500 B.C., three ounces of silver were equal to one ounce of gold.

For 5000 years, before it was discovered that silver had material and industrial uses, it held a consistently high value in relation to gold. This relationship was upset by the development of the phenomenal Comstock load in the late 1800’s. Silver also dropped briefly during the Depression where it took 70 ounces of silver to buy an ounce of gold. I state this briefly to maintain factual integrity due to government intervention in revaluing gold and silver. The quick rise of silver to gold ratio of 27:1 occurred when the United States Treasury fixed silver at $1.29 per ounce and gold was fixed at $35 per ounce. Gold’s increase in value is widely known among precious metals investors. The fact remains that silver was also revalued a few years after gold.

After the government removed the official backing of silver certificates in 1965, two years later, the U.S. Treasury lost control of silver and its price rose to $2.50 per ounce. This placed silver once again near the historic ratio of 15:1. During the turbulent times since 1971 when the international gold window was closed, both gold and silver had been seeking their corresponding level, in a world of an ever-depreciating dollar.

The Facts About Silver

More recently, silver has been moving in the area around 40:1 to over 70:1 with gold. There are some very strong reasons why this ratio is seriously out of whack, and why it will be increasingly out of whack, until the price of silver rises. The facts weigh heavily in favor of the smaller ratio and that’s a higher silver price. Here are some of the facts.

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