Harinina: History of Gold:Silver Ratio Suggests Much Higher Price for Silver in ...

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The majority of analysts*maintain that gold will reach a parabolic peak price somewhere in excess of $5,000 per troy ounce in the next few years. Given the fact that the historical movement of silver is 90 ? 98% correlated with that of gold suggests that a much higher price for silver can also be anticipated. Couple that with the fact that silver is currently greatly undervalued relative to its average long-term historical relationship with gold and it is realistic to expect that silver*will eventually*escalate dramatically in price. How much? This article applies the historical gold:silver ratios to come up with a range of prices*based on specific price levels for gold being reached. Words: 691

So says Lorimer Wilson, editor of www.munKNEE.com in an article outlining the historical price correlation between gold and silver and what it means for the future price of silver as the gold bull runs it course. Please note that this complete paragraph, and a link back to the original article*, must be included in any article posting or re-posting to avoid copyright infringement.

Gold:Silver Ratio

How both gold and silver perform, in and of themselves, does not tell the complete picture. More important is the price relationship ? the correlation ? of one to the other over time, the gold:silver ratio.

Let?s look at the gold:silver ratio from several different perspectives:

since 1985 the mean gold:silver ratio has been 45.7:1
during the build-up to the parabolic blow-off in 1979/80 the ratio dropped from 38:1 in January 1979 to 13.99:1 at the parabolic peak for*both metals in January, 1980.

Let?s now look at the various price levels for gold and the various gold:silver ratios mentioned above, one by one, and see what conclusions we can draw.

First let?s use the current ball-park price of approximately$1,600 for gold and apply the gold:silver ratios mentioned above in approximate terms and see what they do for the potential % increase in, and price of, silver.

Gold @ $1,600 using the 45:1 gold:silver ratio puts silver at $35.56

Gold @ $1,600 using the 13.99:1 gold:silver ratio puts silver at $114.37

Now let?s apply the projected potential parabolic peaks of $2,000,*$3,000, $5,000 and*$10,000 to the various gold:silver ratios and see what they suggest is the parabolic top for silver.

Silver?s Potential Price Range With Gold At $2,000

Gold @ $2,000 using gold:silver ratio of 45:1 puts silver at $44.44
Gold @ $2,000 using gold:silver ratio of 14:1 puts silver at $142.85

Silver?s Potential Price Range With Gold At $3,000

Gold @ $3,000 using the gold:silver ratio of 45:1 puts silver at $66.67
Gold @ $3,000 using the gold:silver ratio of 14:1 puts silver at $ 214.29

Silver?s Potential Price Range With Gold at $5,000

Gold @ $5,000 using the gold:silver ratio of 45.1 puts silver at $111.11
Gold @ $5,000 using the gold:silver ratio of 14:1 puts silver at $357.14

Silver?s Potential Price Range With Gold at $10,000

Gold @ $10,000 using the gold:silver ratio of 45:1 puts silver at $222.22
Gold @ $10,000 using the gold:silver ratio of 14:1 puts silver at $714.29

It would appear that, any way we look at it, physical silver is currently undervalued compared to gold bullion and is in position to generate substantially greater returns than investing in gold bullion.

Gold:Silver Ratio Conclusion

History will look back at the artificially high gold:silver ratio of the past century as an anomaly caused by the world being deceived into believing that fiat currencies are real money, when in fact they are all an illusion.

This fiat currency experiment will end badly in a currency crisis and when that happens, as it surely will, gold will go parabolic and silver along with it ? but even more so ? as the gold:silver ratio adjusts itself to more historical correlations.

Original Source

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