As silver made its last run up to $50 an ounce in early 2011, it seems someone posted an article every week about the gold to silver price ratio. The 金価格相場-to-silver price ratio dropped to about 30:1 at that time. It had been more than double that little more than a year earlier.
I remember only a couple of articles about the ratio in the past year, and the suggestion was that at about a 50:1 gold-to-silver price ratio, it was time for silver investors to once again buy silver. Personally, I think the ratio will go considerably higher before it moves considerably lower. Why?
In short, with 50% of the annual production of silver being consumed by industrial demand, and signs of slowing economic activity worldwide, I believe the price of silver is going to drop even as the price of gold price (金相場価格). Next, or perhaps simultaneously, inflation sends the price of gold skyward. If I am correct about the magnitude of the price moves, the gold-to-silver price ratio will move much higher than 50:1, maybe as high as 100:1 during this period of time.
When the price of gold reaches levels most will consider outrageously high and unsustainable, many of the middle class of the world will turn to silver to protect their eroding assets value from the ravages of inflation. This is the period of time when the gold-to-silver price ratio will begin moving lower, toward its longtime historical levels.
Why will it move back to the 17:1 range? Because price manipulation will cease, or maybe because of supply/demand forces? Those things will contribute, but they will not be enough. As an example, consider the platinum-to- 金相場価格ratio. It is now less than one; that is; the price of platinum is less than the price of gold. And platinum is 30 times more scarce than gold. Why isn't the price of platinum 30 times higher than the price of gold? By the way, though the price of platinum was higher than that of gold for many years, it was never even double; much less thirty time the price of gold.
The short answer is that platinum does not, and will not have the huge investment demand that gold does. Although platinum is considered a precious metal because of price, it is a commodity, an industrial metal.
Silver has a history of being thought of as a precious metal. And even though it is much more of an industrial metal than gold price (金相場価格), investor demand will jump-start the ratio downward. When that time comes, there will once again be articles about the gold-to-silver price ratio. Many reasons will be cited to convince investors that the ratio will revert to the historic norm. But it is not the reasons themselves that will cause the long term ratio to achieve.
It is the citing of those reasons, and convincing the investors that it is inevitable. With the price of gold in the thousands, and silver in the low hundreds, it will be the expectation that the historic ratio will be achieved that will keep investors buying silver until it does. And with so little physical silver, left (over 90% ever mined is gone forever), it will not take many believing investors to make it happen.
Silver Investing - The Gold-To-Silver Price Ratio, And Why I