Chinese Investors Encouraged to Buy Silver
Source: Seeking Alpha, Investor Nirav (8/9/09)
". . .gold is currently about 65 times the price of silver."
By these standards, silver is undervalued when compared to gold. Check out this Chinese news video advising investors to buy silver.
Going by the historical ratio of 16, silver should trade for nearly $60/ounce. Or conversely gold should sell for a mere $240/ounce. Although I have a gut feeling that one is more likely than the other, if you wanted to trade this without making a directional bet, you could enter a pair trade.
In this case, the pair trade would be to short gold and go long silver; however, with all the manipulation that seems to be going on with regards to both of these commodities, there's no guarantee as to when the ratios will converge to the historical averages. Unlike the gold-platinum ratio, which was a great trade for futures traders in December 2008 (The price of platinum dropped below that of gold for a few weeks creating a great paired trade), this may not pan out for a long time.
Better to just buy silver coins or silver bars directly or Perth mint certificates.