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Nickelless
Administrator
USA
5580 Posts |
 Posted - 04/27/2008 : 22:16:17
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I just downloaded an interesting e-book at You must be logged in to see this link. and there's a lot of talk in the e-book about what it says is a historic 16-to-1 gold/silver price ratio, which in fact was the case when silver hit $50 in 1981 and at that time gold was also at an all-time high adjusted for inflation. So right now, adjusted for inflation, gold's peak in current dollars was somewhere around $2400, and likewise silver's peak in current dollars would be around $150. But that got me to wondering, how do we know that gold isn't overpriced rather than silver being underpriced? How can we tell which PM is lowballing other than to say that 16-to-1 is the historical price ratio between the two? Why is silver underpriced at $17 rather than gold being overpriced, figuring that a current 16-to-1 ratio would put gold at about $272 relative to silver instead of silver at $55 relative to gold? I'm not looking at absolute historical prices, I'm just looking at price ratios and trying to figure out why silver should be considered underpriced and what factors make it underpriced instead of gold being overpriced.
Have I made myself as clear as mud? 
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86 Posts |
Posted - 04/27/2008 : 22:55:17
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Who knows? Since there is such a shortage of silver, one would think that a 5:1 value ratio gold to silver could exist, respectively. But using dollars is not a good measuring tool to evaluate the values of PMs. If that's the case, then both metals are WAY underpriced.
We wise as we age giving us a better understanding we're not wise. |
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16 Posts |
Posted - 04/28/2008 : 00:21:16
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| I've wondered about this a lot too. it's currently at about a 52:1 ratio. I guess we'll see which correction stops and which keeps going, gold or silver. I have a feeling gold is going to consolidate at around $800. the sell off isn't over yet. |
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Saul Mine
Penny Collector Member
USA
343 Posts |
Posted - 04/30/2008 : 16:26:03
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The gold/silver ratio was 16:1 until 1504 when a huge silver mine was opened. Then it was 20:1 until 1859 when the famous Comstock Mine was discovered. It has been above 40:1 ever since. So any time somebody mentions the 16:1 ratio, you think "Yeah, 500 years ago!"
The market price is set by supply and demand. Iridium is about as rare as gold, but sells at a small fraction of the price. That's because nobody can think of any use for iridium except to harden the tips of ballpoint pens. Silver is a different situation: the price is kept low by a phony oversupply. Over ninety percent of the silver traded is not metal, merely a contract that will never be fulfilled. A buyer bets the price will go up, a seller bets it will go down, and they make a contract. At some point the loser pays off the winner in cash and the contract is cancelled. That contract is treated exactly the same as an exchange of physical metal. Comex has set aside the restrictions that apply to all other commodity trades.
And that is why silver is underpriced. If they had to deliver physical metal for all their contracts, the world would get its nose rubbed in the fact that refined silver is five times as rare as refined gold. |
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Edited by - Saul Mine on 05/07/2008 04:25:29 |
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TenBears
1000+ Penny Miser Member
USA
1021 Posts |
Posted - 04/30/2008 : 17:05:45
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I knew Saul would be weighing in on this one. Even though Saul says silver is currently underpriced, I think he would say one needs to be buying gold at this time due to the current gold/silver ratio. Buy gold now when the ratio is in the 50:1 range. Then, when the ratio jumps so that one gold is worth, say 90 or better silvers, trade your gold for silver.
Saul, is the foregoing correct? |
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Saul Mine
Penny Collector Member
USA
343 Posts |
Posted - 05/02/2008 : 20:27:34
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Well that is what I keep saying, so I sure hope it's correct. But there are other factors to consider.
You want to be holding silver when the short squeeze happens. That might correspond to winter of an even numbered year, like it has so far this century, but it might not. And you want to get silver well before the squeeze becomes obvious. By the time you can see it, it's too late. However, it will be extremely difficult to sell at the actual peak. That is because dealers know what's happening and they don't want to buy at a peak. And we don't know if peak silver will be a brief phenomenon or extended. So it's hard to guess whether to hold gold or silver. But if you have either you are going to be better off than most people. |
A penny sorted is a penny earned!
Please use tinyurl.com to post links. Long links make posts hard to read. |
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Nickelless
Administrator
USA
5580 Posts |
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misteroman
Administrator
USA
2565 Posts |
Posted - 05/03/2008 : 00:58:02
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| personally, I think silver is way under priced when compared to gold. |
Buying CU cents!!!! Paying 1.2 unlimited amounts wanted. Can pick up if near Ohio area. |
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Saul Mine
Penny Collector Member
USA
343 Posts |
Posted - 05/03/2008 : 05:39:38
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quote:
Originally posted by Nickelless
Hey Saul, you may have posted a link elsewhere, but do you have a graph showing the peak in silver prices corresponding to the winter of even-numbered years?
You must be logged in to see this link. |
A penny sorted is a penny earned!
Please use tinyurl.com to post links. Long links make posts hard to read. |
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Is silver underpriced or is gold overpriced?
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