Nice article. I like these paragraphs "In 2011, the United States sold nearly 40 million Silver Eagle 1-oz coins while only selling approximately 1 million Gold Eagles a near 40:1 ratio. This ratio is more than double the 5,000-year price ratio, and more than double the relative natural occurrence of silver. In other words, over the long-term this demand profile is totally unsustainable and must result in (first) the total depletion of silver inventories, and (second) a rise in the price of silver sufficient to stifle silver demand sufficiently for balance to be restored." "Knowledgeable investors know that the long-term price ratio of gold versus silver (i.e. over roughly 5,000 years) has averaged approximately 15:1. This closely coincides with the ratio of the natural occurrence of these two elements in the Earth's crust (approximately 17:1). Not only did this price ratio remain relatively constant over several millennia, but the fact that the price ratio so closely mirrors the rate of occurrence of the two metals shows that (in relative terms) our species has demonstrated a roughly equal preference for the two metals throughout recorded history. These facts establish beyond any possible contradiction that over the medium or long term the price of silver must remain at close to a 15:1 ratio versus the price of gold. There is only one factor which could alter this arithmetic: if our preference toward the two metals changed. Has any such change in preferences occurred? Yes. Silver has become much more popular."
The GSR will eventually return to its 5000 year price ratio. However it may take another 5000 years to do so.
I said it MAY take another 5000 years to do so. How long do you think it will take geewiz? 6 months? 1 year? 5 years? In your lifetime? I own 1 oz of Gold nuggets. The day the GSR hits 15:1 I will give it to you for free. I will be able to afford to do this because I will have made a killing on the massive price increase of Silver.
yeah, 15:1 would be great but I'm not betting my future prosperity on it. I remember reading that aluminium was once considered a prestigious metal, and Napoleon had a dinner set made of it. By the 20th century it became industrial and, well, eating off an aluminium plate became plain crappy (and could affect your mental processes long term if you used it too much). Now, perhaps exotic alloys will one day replace aluminium as a light-weight industrial component, but that doesn't mean aluminium would revert to prestige and you'll one day find cash-for-aluminium stalls in your local shopping centre. Having said that... considering how my REE stocks are going I am very willing to extol the rarity of silver! 15:1... that was in the olden days when silver was retained not consumed! Let's go for a 7.5:1 ratio to account for all the non-recoverable Ag that's been put in iPods and cruise missiles never to be seen again! USD219.75 silver next Friday! I'm not joking. I have expenses to cover.
Yeah but extrapolating the ASE and gold eagle sales of 40:1 to represent the ratios of the entire silver and gold market is just stupid. And I'm all for long term chats. The charts that plot just months or a couple of years of a stock/commodity price are pretty useless. But when people start talking a price chart over 5,000 years then...ah yeah.... time to beat a hasty retreat !
After a careful study of the 600 year silver chart I detect a bull trap followed by a brief head and shoulders pattern at the turn of the 18th century followed by a small correction. This says to me that soon we will see a major price breakout, perhaps reaching early 15th century levels.
Just because something has a 17: ratio in the ground does not mean that their prce must reflect that. I like the rationfor some other reasons, but to use it solely as justification is weak
It's a fuzzy permabull article. FACT - The GSR hasn't gone under 20 in the last 200 years FACT - When silver hit its high in 1980, the GSR was at about 36 FACT - The average life expectancy of an Australian is 81.5 years CONCLUSION - I'm not holding my breath for a 15:1 GSR. ESTIMATION - The best we'll ever do in our lifetimes is about 25.
There's no arguments to refute. Using a law of averages over a 5000 year period would turn the last 100 years of financial changes and increases into essentially nothing. It's like saying, "In 5000 years, the worlds population is still only a few million on average this year"
The permabulls have been pretty much right. Silver has gone from 4 bucks to 30 bucks give or take and the fundamentals haven't changed much at all and could easily be argued to be better than they were.
