Silver to Gold Ratio

The Gold Silver Ratio

Silver is often perceived to be subordinate to gold. But history clearly shows that during precious metal bull markets, silver outperforms gold. Just consider the precious metal bull market of the 1970s… Between 1970 and 1980, gold prices increased from the Brenton Woods fixed price of $35 an ounce to a high of $850. It was a 2,329% jump in the ten years. Meanwhile, silver went from about $1.50 in 1970 to over $50 an ounce in 1980— a 3,233% increase. So far, gold has already crossed its nominal high of $850 an ounce. But silver has come nowhere near its 1980 nominal high of $50 an ounce… I think this is all about to change because… Silver is Money, Too The investment community’s general neglect of silver has historical origins. For thousands of years, silver— not gold— was the coin of the civilized world. One of the most complete histories on silver can be found in the book “The Silver Bonanza” by Franklin Sanders and James Blanchard. The book begins with the following quote from Milton Friedman: “The major monetary metal in history is silver, not gold.” Evidence of silver being used as money extends back to at least 4,500 years. According to “The Silver Bonanza,” the first mention of silver in the Bible is in the Old Testament in roughly 1850 BC. During King Charlemagne’s reign, silver was the only legal tender metal. Advertisement China’s Loss is Your Gain On January 1, 2010, a tiny mining company took legal control of a natural resource that today threatens the world’s fastest growing economy. And thanks to some timely reporting, our readers took early triple-digit gains in the days that followed. Today, there’s even bigger news in the works… But by the time you hear about it in the Wall Street Journal , our readers will be depositing their gains in their savings accounts. Click here to learn more. Early colonial America also preferred silver to gold. Settlers rigged the gold-silver ratio to encourage the flow of silver into the United States. It took 15.5-16 ounces of silver to buy one ounce of gold in the rest of the world but, by decree, it took just 15 in early America. Silver was the major monetary metal for the U.S. until 1873 when it was demonetized; when this occurred, its richer cousin gold was given the sole key to the currency kingdom. Gold has received all the accolades and nearly all the ink ever since. Most “hard money” advocates will talk about gold as money for hours, as if it were religion. Lowly silver gets little or no time at all… But don’t shy away from silver. Gold always moves first in a precious metals bull market because it is seen more as money, yet silver posts better percentage returns nearly every time there is a sustained rally in gold. So why do people still ignore silver, especially as it is priced so reasonably compared to gold right now? There are five reasons that I see: The 1873 demonetization of silver occurred roughly 100 years prior to the official end of the gold standard. Investors have short memories. So when they think of …

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