The gold silver ratio is quoted everywhere. But silver and gold prices are actually not well-related—in fact, they are more like a different species. Could silver be the Generation X of monetary metals?
Beware of too much talk of the relationship. Why? Because "the talk" comes from big money (i.e., institutional investors), and that money has run the markets and the news for quite some time.
Read more here.
The problem is that such systems break down. And you can see the symptoms of such a breakdown before the “patient” succumbs. The price ratio of Yellow to White is way out there.
Gold prices need to be controlled, and the reason has been forgotten or ignored. Silver prices, however, have become something of a conundrum to the powers that be. The big players are stuck—whether by number concentrated short position or simply the erosion of the dollar.
The more difficult it becomes to keep the prices of both metals under control, the more blatant and drastic the price manipulation. We are seeing it now. History repeats itself again and again—there have been many Generation Xs.
So how does the gold price help us in the decision to initially invest or increase our diversification into silver? Here’s a hint: Silver and gold prices historically trade at a ratio of 1 to 15.
Read about silver and gold prices here.
The real reason that silver and gold prices are so different is based on basic supply and demand. This is nothing new, but it is fascinating. The herd mentality, although irrational, is possibly the most bullish aspect of silver.
It’s perfectly reasonable to estimate and truly understand the current supply deficit in silver. But taboo keeps the herd huddled in denial. Eventually, the herd gets squeezed, and a few strays pour into the silver market, claiming physical.
Hedge funds are the easiest to imagine because they seem like the wild-wild-unregulated-West comes to New York, but a few large private investors could have the same effect.
This may involve a panic, which would be unlucky, though not necessary. It is tough to be hopeful about things of the world while staying detached from the proximity of doom, but realism happens.
And that’s what we're all about!!
Anyway, the silver market is SO SMALL (millimeters to gold's meters) and so industrial (meters to microns), that a true physical squeeze will bring a very fast ending.
Take a deep breath and go buy a few silver coins.
Gold is simply a different animal. There's no comparing industrial consumption, and the emotional aspects are significant.
My friend, my father, Mr. Goldbug, comes from a different direction in history. I would venture to guess that most gold bugs come from solid monetary positions. Mainstream portfolio managers always recommend diversification into metal (paper) assets, and there’s nothing wrong with that.
Those of us entering the silver market now come from a different experience. There are now legions of small investors coming forth from an ocean of variation, looking up and out for safety and wealth, alternative investments, liquidity, and something real.
The end of cheap silver is upon us. Silver will join gold once more as a partner monetary metal. The prices will likely find a new equilibrium and the ratio could easily reverse.
Gold And Silver Prices - The Broad View
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