The price of gold hit a new long-term high of nearly $1,770 in the spot market during trading in Asian markets on Sunday. But it’s silver that is increasingly moving into the spotlight.
In Tuesday trading, the price of silver is up another 2+%, trading at $17.42 per ounce. Meanwhile, gold is up just under 0.5% today at $1,742.20.
This has taken the gold/silver price ratio to almost exactly 100:1.
Why is this big news? In mid-March, this price ratio had stretched to 125:1. This is an all-time high over the 5,000 years
that we have had price data on these metals.
To put this into context, for most of this period of time the gold/silver price ratio has gravitated around a ratio of 15:1. This reflects the natural supply ratio of the two metals: 17:1.
Silver has never been so underpriced versus gold. Ever.
But that ratio is starting to rapidly reverse.
In just over two months, the ratio has gone from 125:1 to 100:1. As the price of gold has risen from sub-$1,500 per ounce to ~$1,750 (a 16% gain), silver has soared from a low of $11.60 per ounce to $17.39 – a 50% rise in price
Over that period of time (as the gold price has been rising) silver has outperformed gold by roughly 3:1.
This will come as no surprise to either regular readers of Dynamic Wealth Research or experienced precious metals investors.
A full-scale rally is now underway in precious metals. In any/every extended precious metals rally, silver always outperforms gold – by a wide margin.
We alerted readers to this on March 20th just after the price of silver crashed below $12 per ounce.
Silver Starting To Bounce?
Here’s one more reason why investors may not want to dismiss the late-week bounce in the price of silver as merely “a blip”. The gold/silver price ratio.
Earlier this week, that ratio hit an all-time extreme of over 125:1. This compares to the historic price ratio (over a span of 4,000 years) of 15:1.
When bullion markets are in genuine “rally” mode, silver always outperforms gold. The gold/silver ratio as of market close on Friday? 119:1.
Apart from historic price data and patterns in previous rallies, there is another reason to expect the gold/silver price ratio to shrink much further even as the price of gold continues to price.
In terms of mine supply, there is only a 9:1 supply ratio between the two metals
Keep in mind that long-term price data indicates that humanity has always had a roughly equal preference for gold and silver relative to supply.
The long-term 15:1 price ratio closely mirrors the 17:1 ratio at which these two metals occur in the Earth’s crust.
However, because silver is grossly underpriced, the silver mining industry has been almost completely wiped out. As a result, the current supply ratio is only 9:1 – roughly half the natural rate of occurrence.
At a 9:1 price ratio, silver would be at nearly $200 per ounce today.
Silver is on fire. But this is just the beginning.
At a fair market price for silver, it’s still more than a ten-bagger from the $17.39 per ounce at which it currently trades.