Is silver undervalued?steemCreated with Sketch.

in #silver7 years ago

In order to determine if silver is undervalued with respect gold, we have to look the gold-silver ratio.

The gold-silver ratio, it is the price of gold divided by the price of silver, in other words it measures how many units, e.g. ounces or grams, of silver are required to get one unit of gold. So the higher the ratio silver is undervalued with respect of gold and the lower the ratio silver is overvalued with respect to gold.

Currently the ratio is between 72 and 73. If we say the charts below we notice the average ratios in the last 225, 20, 10, 5 years are 48.52, 61.28, 62.33 and 68.26 respectively. So we can say silver has been losing value in gold terms along the history.

It is worth to point out the highest values of this ratios were 96.71 in December 1940, 94.75 in January 1991, 79.76 in December 2008 and 79.57 in February 2016. The lowest values were 18.48 in December 1919, 15.74 in March 1968, 17.25 in January 1980, 43.73 in February 1998, 35.25 in April 2011.

I would like to mention that during most of the XIX century the ratio was 15.5, during that period of time the international monetary system used the gold and silver standard with this fixed exchange rate.

What do you think are the reasons that silver is loosing its appeal among investors?

Disclaimer: This is not financial advise

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The charts are from denvergold.org

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Having invested in silver at a very bad time in 2012, it was just downhill from then for me. No matter what, I am holding on to it.

Yes, it was a bad time. Currently silver has a lot of potential.
Thank you for your comments.

The amount of silver in the ground is approximately 9 times more plentiful. So shouldn't the ratio be somewhere in this vicinity? Cheers

I see very hard, it will get this level. As you can see the lowest level was approximately in the area of 15.5; and this was in the XIX century when it was fixed rate between gold and silver. Later in 1968, the ratio reached 15.74.

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