The Case for Undervalued Silver When Compared to Gold

Is Silver a Better Buy Than Gold?

Disclaimer: I know know what the heck the market will do in the next year or even tomorrow. This isn't investment advice. It's just some speculation about shiny things based upon research I did to satisfy my curiosity.

See how the gold/silver ratio has approached a historical high lately:

Gold to Silver Ratio - 100 Year Historical Chart

The Silver : Gold Ratio is Spiking

Right now, the ratio is over 79:1 for silver:gold. That means you need almost 80 ounces of gold to purchase an ounce of silver. The biggest thing to note is that this ratio is about five times higher than the historical average of about 15:1. Even in the 20th Century, the ratio has averaged under 50:1.

Anyway, this brings up the first reason that many precious metal watchers think the ratio will adjust. The ratio's spiking, and the kind of people who like to predict with charts say that it's due to fall soon.

Silver Gets Used More and Gets Used Up

You can't really go by charts because spiky lines don't prove that much. However, you can look into things that support silver's value. These are some things that appear to be true:

• There is more of a demand for silver as an industrial metal than there is for gold.
• Gold never gets used up, but that's not true for gold.
• There's a larger demand for above-ground silver than gold.
• It costs as much to mine silver than gold, so it's usually mined as a secondary product when mining for copper because the price is lower.

You can check this out at the source at Mining.com.

Source: http://www.mining.com/silver-is-now-even-more-precious-than-gold-do-you-own-any/

Partly, precious metals get their value from their perceived value. Even though silver may have more industrial uses, this actually dampens the perception of the "Poor Man's Gold." It's considered more of an industrial metal than a luxury metal.

What Will Change the Silver:Gold Ratio?

Gold prices tend to increase when people are worried about weak economies. Those same concerns may also boost silver's price, but gold does better under those conditions. Because silver has more industrial uses, it tends to close the gap when industries are doing better and create more demand for it. Gold is not more rare than silver -- not really - it's mostly perception and perhaps contract manipulation that drives the ratio.

It's Also Easier to Find Silver Deals

It's a lot easier to find "junk" silver around and get a good deal than to buy gold. If you don't have a lot of money, a roll of pre-64 U.S. dimes can get your stack started. It's not so easy to start stacking gold.

WHAT DO YOU THINK

Please let me know what you think in the comments. I learn a lot from the opinions of the smart folks here on SteemIt.