Gold:Silver Ratio: Silver Value Highest in Five Years


"At this point, silver has momentum."

As precious metals continue to lead the commodities boom globally, the most frequently asked question these days is where does the gold:silver ratio stand.

Over the years, gold has been the high value beneficiary commodity in comparison to silver. But last week, the gold:silver ratio fell to just above 45:1. According to Wayne Atwell, managing director of Casimir Capital, the silver value in comparison to gold is the highest in the last five years.

"This is because investors are regarding silver as a safe-haven investment just like gold," he says.

Silver remains more than 30% below its nominal price in 1980 and given the very sizeable quantities of silver used in industrial applications in the last 30 years and in the 20th century, the ratio is likely to continue to revert to the historical long-term average of 15:1, meaning that 15 ounces of silver should in time be able to buy 1 ounce of gold. This makes sense from a supply perspective as geologically there are 15 parts of silver to every 1 part of gold in the earth's crust.

Atwell says that the ratio change in silver's favor is more an indication of investors looking for another safe investment in precious metals than a lack of interest in gold. Gold has been very strong until about the last month or so as it's been going through a bit of a correction. Silver was initially left in the dust, but it's been a lot stronger in the past 612 months, Atwell noted.

"It doesn't reflect poorly on the performance of gold, it reflects the fact that silver had not participated as much and now suddenly people are figuring it's going to play catch-up," said Atwell, adding, "At this point, silver has momentum."

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