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The Gold:Silver Ratio


The Gold:Silver Ratio has been mentioned here before. Historically, it has ranged from 15:1 to 20:1 fairly consistently. Not until the last century or so has it consistently stayed outside that range. Many analysts think a return to that range will happen in the future. And so it may.

Here is Keith Weiner's Analysis of that Ratio today.

However, based on current supply & demand fundamentals, the ratio will continue to rise. This means that until there are major changes in the marketplace, such as currency wars and competitive currency devaluations, or stock or bond market blips, that trend might continue for a while yet. Same as a low spot price of bullion. 

That old Gold:Silver Ratio range was based on a time when gold and silver were both widely seen and used as money. Currently it is only the East that is buying gold & silver. The West is a net exporter of bullion. How much longer teh West can continue doing this really depends on the USD and the financial system that goes along with it.

According to TDV & JSMineset the bullion bear market of the last few years is coming to an end and the bull market is resuming. This is what some have been saying for the entire decade. So long as price inflation doesn't make itself more of a problem, things might continue as-is for the short-term. 

Negative interest rates in the past have created runs-on-the-bank, because it just doesn't make sense to pay the bank to borrow your hard-earned money. It is very ineresting that this reality is very slow to really sink into the mindset of traditonal savers.

What is also interesting is that in many countries, bail-in legislation means any deposits over $100k are not insured. Anything not in a chequing account is not insured because stocks, bonds, real estate, loans & safe deposit boxes are also uninsured. So any retirement, savings, or other accounts where the bank has used your money to invest in anyting, is also uninsured. Any assets that are not insured, will not be covered by your local Deposit Insurance Agency in the event that a bank is at risk of default without a bail-in or -out of some sort from your Government. 

Various narratives of how this situation can play out can be seen in different parts of Europe and South America. As the local currency gets used to save the banking system the currency loses more value and opens the door to alternative types of money, such as gold, silver, bitcoin, etc.

Relating this back to the Gold:Silver Ratio, so long as the dollar continues to bump along as-is, the Ratio will continue to get wider. Gold might not have lost its role as a store of value and is still used to settle trade, but silver is mostly viewed as mostly commodity. Why use silver for spending when the doillar is still accepted by everybody? Only once currency problems really take root do people start looking for more alternatives. So until currency troubles come home, the Gold:Silver Ratio will probably continue to widen. Meaning its just a quesion of timing, and being early to the party. One could probably say that this party, is a party for which we'd rather be early than late.  

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