Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19
Is There a Stock Market Breakout Ahead? - 6th Nov 19
These Indicators Aren’t Putting to an Economic Resurgence - 6th Nov 19
Understanding the Different Types of Travel Insurance - 6th Nov 19
The Biggest Gold Story Of 2020 - 6th Nov 19
Best Money Saving FREE Bonfire Night Fire Works Show Sheffield 2019 - 5th Nov 19
Is the Run on the US Dollar Due to Panic or Greed? - 5th Nov 19
Reasons Why Madrid Attracts Young Professionals - 5th Nov 19
Larger Bullish Move in USD/JPY May Just Be Getting Started - 5th Nov 19
Constructive Action in Gold & Silver Stocks - 5th Nov 19
The Boring Industry That Hands +500% Gains - 5th Nov 19
Stock Market Chartology vs Fundamentals - 4th Nov 19
The Fed’s Policy Is Like Swatting Flies with Nuclear Weapons - 4th Nov 19
Stock Market Warning: US Credit Delinquencies To Skyrocket In Q4 - 4th Nov 19
Stock Market Intermediate Topping Process Continues - 4th Nov 19
Stock Market $SPY Expanded Flat, Déjà Vu All Over Again - 4th Nov 19
How To Buy Gold For $3 An Ounce - 4th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Gold Sticker Shock and Silver Surge

Commodities / Gold and Silver 2010 Nov 24, 2010 - 01:05 PM GMT

By: Dr_Jeff_Lewis

Commodities

Price is an interesting element of the marketplace.  At one price, a product may be a perceived bargain, yet at another still similar price, the same product would be a perceived rip-off.  As you walk through a supermarket, it becomes evident the tricks that certain prices can play on your mind.  $1.99 looks far less expensive than $2, even if the difference is only one cent.  Ten for $10 deals are more likely to drive more sales volume, even if the normal market price is actually $1 each. 


However, beyond price psychology, we also have the sticker shock effect.  While few of us would think twice before placing a $5 item in our cart, most everyone would second guess their buying habits at a $10,000 price point.  As prices rise higher, we seek out alternatives, even if the higher price is still a relative bargain. 

Gold’s Relativity to Silver

From the perspective of consumption, but not investment, gold seems to have hit its upper bound.  An article in the Wall Street Journal found that as gold prices head higher, jewelers are moving towards lighter pieces with less gold and more silver content in an effort to reduce the effects of sticker shock on their customers.  Based on pure and simple changes in metals prices, a $100 bracelet in the year 2000 would cost more than $500 today.  At prices in between those two price points of $100 and $500, there are plenty of buyers having second thoughts. 

To continue to attract shoppers, jewelers are lowering the karat weight of gold and increasing the amount of silver.  A 22k gold band made of gold and silver is just as yellow, but nearly 10% less expensive than a 24k band.  To a shopper, the difference between 22k and 24k is insignificant, but to silver investors, it's huge.

Confirming the Gold to Silver Ratio

After the fall of bimetallism and the general decline in commodity backed currencies, the gold and silver ratio shed some of its stability.  The highs and lows which were previously held in place by law rose higher and lower.  Recently, the ratio peaked at near record highs as gold moved into uncharted territory.

However, the new jewelry marketplace is showing that the gold to silver ratio does still have some fundamental backing.   When gold runs too high, the obvious solution for jewelers is to add more silver and reduce the per-item price and resulting sticker shock.  The justification for the gold to silver ratio, outside of previously legally defined levels, is evident in jewelry.

As the market for gold in jewelry has cooled since 2005, silver is quickly taking its place.  Should the economy rebound fully to its 2007 boom levels, consumer jewelry purchases will only aid in helping silver fill the ratio gap between the sky-high price of gold.  Plus, with silver production routinely running under the level of gold production, any change in preference from gold to silver is multiplied by the differences in available metal stock and production supplies.

With the tide turning in jewelry, silver investors may be best to root not just for higher silver prices, but higher gold prices.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules