The Historic Gold Silver Ratio

There is something about the gold silver ratio (and gold and silver) that makes people appreciate their existence. If asked whether you wanted to hold a $100 dollar bill or a piece of silver or gold, most people would reply silver or gold even if it wasn't worth the paper monetary amount. This is probably due to the fact that currencies were based off a gold standard before they were able to fluctuate based on the weaknesses and strengths of other currencies. These prices are very important when it comes to the historical gold-silver ratio.

Gold prices were not alone in determining the value of exchange rates. Silver was actually used quite a bit during the latter 1800s in the United States and in China. Historically, gold has always outweighed silver in the historical gold silver ratio which was slated at 15 to 1.

So why is gold more valuable? Gold is a metal which, traditionally, has been much more difficult to find geographically and it is much more difficult to cultivate. Historically, silver has been more common and is used for a variety of purposes such as for industrial purposes, leading to much lower prices relative to gold. Up until recently, gold was more scarce than silver.

A Leap In Silver

Interestingly enough though, silver has appeared to become stronger in the market against gold in the last 30 years. I don't mean to say that silver is stronger than gold, only that the gold silver ratio has begun to close the gap a bit.

Many believe that gold is falling since silver is becoming increasingly stronger but this is untrue. The reality is that both metals are increasing in value yet what makes silver prices appear to be stronger, is that they are increasing at a higher rate than gold. Recently, silver increased 300% to $16.19 per ounce from 2001 when it was only selling for $4.05 per ounce. Gold also performed well in the same eight years increasing 219%.

The reality is that there is less silver available above and below ground. This fact should make you run towards silver because the price is no where near the supply ratio.

Gold remains strong in perceived value - but it should be noted that silver is unpredictable in today's market. The yellow metal is still viewed as a metal with monetary value while silver is both industrial and monetary. Historically, gold has been stronger than silver, but with the increasing momentum and demand, silver could be quite prosperous for investors.

As the gold silver ratio normalizes to reflect the real supply - look out for unimaginable silver prices.

For an easy way to get started and learn more about the gold silver ratio, download our Free Guide.

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