Best of the Week
Most Popular
1.China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015? - Nadeem_Walayat
2.Gold Price Awaiting Outcome of Greece Crisis - Clive_Maund
3.Gold Price Peculiar 6 Month Cycles - Rambus_Chartology
4.Gold Price Just a Little Bit More - Bob_Loukas
5.8 Unprecedented Extremes Indicate a Stock Market Bubble in Trouble - EWI
6.Gold And Silver – Without Either, You Will Be Greeced - Michael_Noonan
7.Lies, Damned Lies and Statistics - James_Quinn
8.China Crash, Greece Crisis Harbingers of Stocks Bear Market? Video - Nadeem_Walayat
9.Gold and Silver Record Shorting - Zeal_LLC
10.Markets Big Deflationary Downwave Quick Reference Guide... - Clive_Maund
Last 5 days
Stock Market SPX Triggers Sell Signal - 3rd Aug 15
The Gold Investment Demand Juggernaut - 3rd Aug 15
Stock Market Pullback at Hand, Gold About to Rally? - 3rd Aug 15
Gold – The More Hate, The More Bullish We Become - 3rd Aug 15
Stock Market Critical Week Ahead - 3rd Aug 15
Gold Price Near Intermediate Bottom - 3rd Aug 15
Stock Market Reluctant Primary Wave IV? - 2nd Aug 15
Power and Compassion - 2nd Aug 15
Preparing for The Stock Market Crash - Inverse ETFs and Puts Timing... - 2nd Aug 15
Commodity Prices Slump Signals Slow Economic Growth Outlook - 2nd Aug 15
BSE Sensex Stocks Bear Market Underway - 2nd Aug 15
What Microsoft’s Dismal Earnings Report Really Tells You - 2nd Aug 15
Gold And Silver Charts Are The Compelling Story. Fundamentals Do Not Apply - 2nd Aug 15
The Fed Can't Stop the Commodity Bear Market - 1st Aug 15
Meet the Leader Who Turned Google Into a “Buy” - 1st Aug 15
The Greek Coup: Liquidity as a Weapon of Coercion - 1st Aug 15
Gold’s Amazing Resiliency - 31st July 15
Silver – A Century of Prices - 31st July 15
Demand for Gold Bullion Surges – Perth Mint, and U.S. Mint Cannot Meet Demand - 31st July 15
Reasons Why the Greek Crisis Will Only Get Worse - 30th July 15
The War On Cash: Why Now? - 30th July 15
Greece - The IMF Experts Flunk, Again - 30th July 15
Threat Of Cyber Warfare the “Other Reason To Own Physical Gold” Warns Rickards - 30th July 15
The 5 Biggest Myths and Lies about the Middle East - 30th July 15
Greece, Diversion, and the New World Order - 30th July 15
Ibuprofen Warning - The Pain Killer that can Kill You! - 29th July 15
More Ritholtz on Gold, and Another Response - 29th July 15
Crude Oil Price Is Lower – and You’re Richer - 29th July 15
U.S. Home Sales Market Is Dead – This Chart Proves It - 29th July 15
Greece- What Happens When Economists Talk Politics - 29th July 15
The Gold - U.S. House Prices Ratio As A Valuation Indicator - 29th July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stock Market Bubble in Trouble

Gold and Silver Supply - Will the Real Ratio Please Step Forward?

Commodities / Gold and Silver 2012 Nov 16, 2012 - 08:05 AM GMT

By: Dr_Jeff_Lewis

Commodities

Best Financial Markets Analysis ArticleThose attracted to the precious metals markets are often curious about the various ratios existing between gold and silver, as well as what these ratios might reveal about the relative fair values of these key investment metals. 


Various Gold and Silver Ratios

The following bullet points provide some facts you can use in your silver/gold ratio analysis.

Above ground:

  • Investment grade: The ratio of investment grade gold existing in bullion form is as much as five times that available for silver.
  • Everything else: All the gold ever mined has been estimated at 160,000- 170,000 tons of gold or roughly 5 billion Troy Ounces. A reasonable estimate for the total amount of silver mined is 56 billion Troy Ounces.  This makes the “ever mined” ratio roughly 11.2 to 1.

Below ground:

  • Potential: The below ground ratio of silver to gold has been estimated at 17 to 1.
  • Actually Mined: Typically, 10 ounces of silver are actually mined for every 1 ounce of gold mined. On an annual basis, roughly 900 million ounces of silver are mined overall compared with just 90 million ounces of gold.

The Paper Markets:

  • The ratio of the price of silver to gold as recently determined by the paper futures market is roughly 53 ounces of silver to one ounce of gold. 
  • As of today, spot silver is trading at $32.65 per ounce, while spot gold is priced at $1724.00 per ounce, making the price ratio a remarkably high 52.80. 

Other Factors to Take Into Account:

  • Sequestration: Both precious metals are highly sequestered and accumulated by individuals for strong psychological reasons, and so they are typically held by strong hands.
  • Industrial Demand: Silver is typically consumed by its industrial applications, such as in medicines, photography and solar cells. Gold is used much more sparingly by industry and is more likely to be used in readily recyclable applications like jewelry.
  • Coin Investment Demand: According to the U.S. Mint, roughly 50 times as much silver is being bought compared to gold for coin investment purposes.

The Ratio on The Street

Given the various ratios mentioned in the previous section, which are typically much lower than those observed in the paper markets, one must be left wondering just how such a high silver to gold price ratio can be sustained over time in the commodity markets and on The Street. 

Although peak silver may never come in our lifetimes, this supply and demand situation indicates that silver’s price is very likely to rise relative to gold over the longer term, thereby reducing the silver/gold ratio substantially.

More Reasons Why Silver Should Rise Relative to Gold

Need some more reasons that the price of silver will soon be playing catch up to gold’s price?

Although gold may be easier to hide or carry than silver due to it being more valuable per ounce, and both silver and gold can be purchased in investment grade forms, consider the following benefits of owning silver:

  • You get more physical silver for the fiat money you spend.
  • Silver investors stand to gain more as the silver/gold ratio falls.
  • Silver is more suitable for people with smaller amounts to invest.
  • The average person buying silver has a store of value and a backup hard currency in smaller denominations that are more easily spent for necessities.

Of course, you can always easily trade your silver for gold, and vice versa, while other commodities are not nearly as easy to barter with.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com

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 © 2012 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.


© 2005-2015 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

Biggest Debt Bomb in History