Silver Coin Commerce

THE GOLD-SILVER RATIO

It makes sense to compare both metals with each other because gold is kind of silvers’ big brother and silver is not called “Poor Man’s Gold” for nothing.

The old Egyptians calculated a gold/silver ratio of 13, a few thousand years ago. This ratio, in which you had to spend 13 silver ounces for one gold ounce, was a popular norm for a very long period of time. During the time of the industrialization from 1792 till today, the average gold/silver ratio was at 31. From the beginning of the 1980’s, the ratio was at 16.2 , which means that you had to spend 16.2 silver ounces with a value of $52.50 an ounce at the time, to receive a gold ounce worth $850.

What does it look like today? With current gold-and-silver prices of 1190 and 18 USD, you must spend 66 silver ounces to buy one gold ounce. As a result, one can see that per this ratio, silver seems undervalued.

THE OIL-SILVER RATIO

During the time of the three big raw material booms of the last century, the oil price was always sky-rocketing before the other raw material subclasses, especially in comparison to precious metals.

So have a look at the relationship between oil and silver. It’s interesting to see that the oil price has already been more than 300 percent above its all time high of 40 US Dollars a barrel, marked in 1980/81.So it’s absolutely unbelievable that silver, which has the highest intrinsic value, is one of the most undervalued assets of all, and currently valued 65 percent below its high from 1980 of $52.50.

In significant turning points one could buy one barrel of oil with one or two silver ounces. You could again discover this development during the final stage of the last big raw material boom from 1968/70 to 1980/82. During this period of time, the oil price increased about 1,900% from 2 to 40 USD. The increase of the silver price was even stronger in those days. With an increase of the silver price from 1.30 USD up to 52.50 USD, the white metal increased almost 4,000% in value. However, these movements didn’t go linear. While the oil price increased in advance, silver still stayed far behind the oil for quite a long time. But with the end of the year 1978, silver caught up and even surpassed the oil price in the end.

One can really say that the price for silver skyrocketed during the final stage of the rough inflationary times of the 70’s. At the end of this enormous upward trend, less than 0.80 oz. of silver was enough to buy one barrel of oil. So the oil/silver ratio was around one.

THE DOW-SILVER RATIO

One can also set the Dow Jones in relation to silver. The DOW is currently about 10,000 points, calculated with a silver price of 18 USD per ounce, the Dow/silver ratio amounts to a rounded 550.

In the year 2000, the Dow/silver ratio was at 3,000, which is the all time high, and in the year 1930 – shortly before the big depression, at a value of 700. At the beginning of the 1980’s, which was the end of a gigantic silver boom, the ratio was at 16.4, which means that 16.4 silver ounces resulted in a Dow Jones of 860 points. These ratios of 16.4 in 1980 and 3,000 in the year 2000 marked absolute turning points and these years were a period of time when silver behaved contrary to the Dow Jones.

ArminVoigt                                                                                                                                                                                                                                                                                                                                                                                                                        Via ProBlogPartners™       

Reference:

silver-info.com