Uncover If Gold/Silver Ratio Indicates A Great Silver Purchasing Opportunity?

Oct. 9, 2011 - PRLog -- Anybody who follows the monetary markets is nicely conscious that the past couple of months have been brutal for investors. Commodities in specific had been hit very hard throughout the latter half of September, falling to multi-month lows in many instances. Concern that the ongoing sovereign debt crisis in Europe and economic weakness in the United States would spread to the rest of the globe was the catalyst for the downward move. Even the safe-haven vehicles gold and silver tumbled in September. Investors frequently flock to the pair throughout occasions of uncertainty, but as we’ve consistently noticed, when monetary conditions get especially rough, gold and silver lose their safe-haven appeal. Visit http://silver-dollar-values.com for more profitable silver and gold tips.

As we wrote lately, prices might have already struck bottom. And although we do not anticipate them to run away to the upside, now might be the time for long-term investors to accumulate positions. That stated, what ought to an investor purchase: gold or silver? That's usually a fascinating question, but particularly so throughout periods of rapid price movements like now. Each metals hit record highs earlier this year, at $1921.15/oz and $49.79, respectively.

Although the timing of the highs was a bit various - silver peaked in April, while gold peaked in early September - investors purchased the two for comparable factors; that's, to hedge against inflation and sovereign debt fears. Conversely, when prices had been falling, silver got hit tougher for an additional cause: It has a lot more substantial industrial-demand component that gold. Close to 46 percent of silver’s total demand comes from industrial users. That figure is only 11 percent for gold. Therefore, when economic concerns are prevalent as they have been lately, it is no surprise that silver would fall more. However, when economic conditions enhance, silver usually outperforms. This has been the paradigm over the past 20 years.

The best method to see this really is through the gold/silver ratio, which measures the relative worth of the two precious metals. The greater the gold/silver ratio, the more costly gold is relative to silver. Conversely, the lower the ratio, the more costly silver is relative to gold. Visit http://silver-dollar-values.net for more profitable silver and gold tips.

Since 1950, the ratio has been very volatile. From 1950 to 1980, it fluctuated mostly in between 20 and 50. From 1980 to 1990, the ratio surged to 100 as the sector plunged from their record highs amid a taming of inflation and central bank selling of gold. The period from 1990 to 2000 saw normalization in the ratio as silver prices ticked up a bit. Lastly, 2000 to 2011 will be the newest period in which the ratio has trended substantially lower, as each gold and silver prices have rallied sharply.

The trend has been gradual, but consistently lower. The only instance when the ratio deviated substantially from the overall downtrend was in 2008/2009, throughout the depths of the monetary crisis in those years. An additional peak corresponded using the dot-com bust throughout the early component of the last decade.

Many investors think that the gold/silver ratio will continue to decline over the next decade as each gold and silver prices appreciate, using the latter rising more swiftly. Ultimately, the ratio might fall to levels below 20, exactly where it last stood throughout 1980, when inflation ran rampant in the United States along with other main economies.

While inflation isn’t but in the double-digit levels witnessed back then, the argument is the fact that the huge debt burdens facing many countries will probably be monetized by central banks, ultimately leading to inflation. We’ve already noticed the beginnings of this to some extent. The quantitative easing programs in the U.S. and also the U.K. have led to the monetization of more than $2 trillion worth of sovereign debt, while headline inflation figures are nicely above target ranges in each countries. Visit http://www.silver-dollar-values.com for more profitable silver and gold tips.

In the exact same time, recent central bank purchasing has legitimized gold and silver as monetary options to conventional fiat currencies. Meanwhile, robust demand growth from investors and customers in emerging markets like China and India is really a bullish catalyst that wasn’t evident throughout the last main precious metals bull marketplace. All of these elements bode nicely for continued gains in gold and silver prices, along with a continued decline in the gold/silver ratio.

Searching at more recent price action, the ratio last stood at 52, with gold last trading near $1643/oz, while silver traded at $31.50. That's above the upper trend line and therefore signals that silver might be a relative bargain compared to gold. Earlier this year, the ratio hit a 31-year low near 32.

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