• 526 days Will The ECB Continue To Hike Rates?
  • 526 days Forbes: Aramco Remains Largest Company In The Middle East
  • 528 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 928 days Could Crypto Overtake Traditional Investment?
  • 933 days Americans Still Quitting Jobs At Record Pace
  • 935 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 938 days Is The Dollar Too Strong?
  • 938 days Big Tech Disappoints Investors on Earnings Calls
  • 939 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 941 days China Is Quietly Trying To Distance Itself From Russia
  • 941 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 945 days Crypto Investors Won Big In 2021
  • 945 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 946 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 948 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 949 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 952 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 953 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 953 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 955 days Are NFTs About To Take Over Gaming?
Ian Campbell

Ian Campbell

Through his www.BusinessTransitionSimplified.com website and his Business Transition & Valuation Review newsletter Ian R. Campbell shares his perspectives on business transition, business valuation and world…

Contact Author

  1. Home
  2. Markets
  3. Other

The Gold:Silver Price Ratio

An article this morning says 'Am I being too conservative with my silver price target?' - reading time 3 minutes. In the article, the author states his current physical silver price target to be U.S.$300 per ounce, which he bases on his long-term physical gold price target of U.S.$5,000 per ounce, and what he (and many other authors) refer to as the historic gold/silver price ratio of 16 (divide 5,000 by 16, and you get 312.5). As someone who owns some physical silver, I certainly would like to simply sit back today and watch the first round of the Masters Golf Tournament, secure in the knowledge that based on this article my economic future and that of my family is secure. That said, while I plan to watch snippets of the Masters today, I will be spending most of it in front of my computer.

My reasons:

  • first, the author doesn't say in his article how he has determined his long-term physical gold price target of U.S.$5,000, nor does he say what he means by long-term. In any event as you know, while I don't discount carefully considered and documented short-term (3 months to one year) gold price trends, let alone gold price targets beyond one year. Accordingly, even if I knew how the author reached his long-term target price I wouldn't place any weight on it. Also, I have no idea how anyone can predict anything in this economic and world environment beyond, at best, the end of this calendar year. Even then, I think any prediction for 2011 for the gold, or any other commodity, price needs to be qualified for 'the effects of completely unexpected events'. For example, who would have thought even 90 days ago that Egypt would experience a major societal disruption;

  • second, as noted above lots of silver commentators talk about a gold/silver price ratio of 1:16, and place various degrees of reliance on that ratio as they formulate their views. At least that is how I read a lot of what is said about the silver price. If you look at an historic gold:silver price chart dating going back to 1975 you will see the gold:silver price ratio touched 1:16 only in 1980, was as high as 1:100 in 1991, was at about 1:38 in 1998, and since then until just recently when it returned to this 1:38 level has ranged from about 1:45 to 1:85. Further, according to Wikipedia, the average gold:silver price ratio over the 100 year period ended 1999 was 1:47 - and that in 1792 and 1803 the U.S. and France respectively legislated that ratio at 1:15 and 1/15.5 respectively at a time silver wasn't used industrially to anything like the extent it is today; and,

  • third, say what you will, from my perspective the world is a very different place in very many ways from what it was even 15 years ago.

As a result of the foregoing I give no weight to predictions based all or in part on what I see today as a meaningless 1:16 ratio. Think hard about this, and then let me know your thoughts - particularly if you disagree with me, by clicking here and commenting on my views.

 

Back to homepage

Leave a comment

Leave a comment