October 5, 2022

Historical Gold Silver Ratio Predicts $100 Silver Price

The gold silver ratio chart below shows the dramatic fashion in which silver has been outperforming gold since last August.  The gold silver ratio is calculated by dividing the price of gold by the price of silver.  A declining gold silver ratio indicates that silver has been outperforming gold.   The gold silver ratio has declined from 65 last summer to a current level of 41.

Since August 2010 gold has moved up 22% from the $1,175 level while silver has soared 92% from the $18 range.  Does the declining gold silver ratio indicate that silver prices are due for a correction or is this a fundamental change in the price relationship?

The gold silver ratio has averaged around 60 since the mid 1970’s.  In January 1980, as silver hit its peak price of $48.70, the gold silver ratio briefly hit 16, but rapidly rose as the Hunt brother’s attempt to corner the silver market came undone and silver prices collapsed.

Gold Silver Ratio - Courtesy Stockcharts.com

Will the current decline in the gold silver ratio continue?  From a very long term historical perspective, a gold silver ratio in the 16 range has been the norm.  Since ancient times, it has typically taken 16 ounces of silver to purchase one ounce of gold.  Interestingly, the earth’s  reserves of silver exceeds that of gold by roughly 16 times.  If this ultra long term relationship were to reassert itself, silver would sell for approximately $90 per ounce based on the current price of gold.  With gold at $2,500 per ounce, silver would have a value of $156 per ounce at the historical gold silver ratio of 16.

The fundamental reason that may drive the gold silver ratio back to the 16 range is growing demand by small investors.  Silver, known as the poor man’s gold has seen a huge surge of public demand, as evidenced by record sales of the Silver Eagles.

Increasing public recognition of the need to preserve wealth against paper currencies will continue to propel silver to historic highs.  Simply put, silver is more affordable to the average buyer who cannot afford the higher priced Gold Eagles.  Silver has a lot of catching up to do and we are probably in the early stages of a fundamental reversion to a lower gold silver ratio which will send silver prices soaring past $100 per ounce.

Comments

  1. I could not agree more! While many find $185 to $250 an ounce silver hard to conceive, I do believe $100 an ounce is not only not out of the question …… but soon to arrive. While inflation and super inflation are a definite with the economy the way it is, and the never-ending printing of the U.S. dollar, silver has proven its claim as an inflationary hedge. Gold is also a great investment and hedge, but has been outperformed as of late by silver. The GSR has corrected itself from 71:1, 80:1, and even as high as 91:1, to 41:1. The normal ratio as history states is 16:1. This ratio will continue to correct itself down to 30:1, 20:1, and possibly as low as where it belongs….16:1. While some argue it is too late to climb aboard the “Silver Jet”, I disagree. I once heard an old-timer say, “Any silver under $100 an ounce is a darn good buy!” I agree with that statement. While I post this article, Silver is @ 34.60/oz. It touched $35 yesterday. Silver will be over $40 an ounce by mid to late next week. As the price of oil and food rises, the dollar declines, and turmoil in the Middle-East ensues, silver offers a true, secure, safe blanket against the ongoing and further upcoming chaos.

  2. J_ahmadi says

    what u do think ?
    silver is too much expensive or gold is too much cheap ?
    now the rate between gold and silver is 40.1 @ the moment
    and if u look @ the chart of Gold Silver Ratio u will get this point
    this rate is exactly on the technical support
    i think Gold Silver Ratio chart must break 40 and silver must go to 38.45 $ per once at lease
    38.45 is 161 % of fibonacci extention may be it could be the last target or 5th main up trend elliot wave
    and as far as i understand from gold chart gold will touch 1540 and then will down till 860 $ in next two years !?
    if we accept Gold Silver Ratio at 35 at the lowest lever in next mounth and the highest price of gold at 1540 the max of silver price will be 44 $ per onz…
    i dont sell silver at 35.65 $ .i m waiting till Gold Silver Ratio break the 40 and when its come back to 41 from 35 then i sell silver ?may be that time the silver price will be 39 or 38 ?
    when we sell silver ? may and june is possible ?what is your idea ?

  3. Geologist says

    Gold is gold. Nothing else compares. Silver as a poor man’s gold is simply foolish. Try storing a significant amount of wealth in silver vs gold. Copper is also a ratio value of silver and a ratio value of gold but nobody considers it as a storehouse of value. Historically it has been GOLD. Convert your silver to gold while the opportunity exists.

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