# The Longest Record Broken: Gold/Silver Ratio Hits Highest in Over 5,000 Years



## azerogo (18 Mar 2020)

The most amazing record broken was not in the stock market, however. It was the long-standing record in what’s perhaps *the longest-running price series in financial history:* *the gold/silver ratio* (i.e. the price of one ounce of gold in terms of ounces of silver). Monday’s market sent that price to a record high – *the highest level in over 5,000 years.

*


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## cremeegg (18 Mar 2020)

From a historical perspective that is fascinating.

Economically not so much.


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## WolfeTone (18 Mar 2020)

What does this signal, if anything?


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## tecate (18 Mar 2020)

WolfeTone said:


> What does this signal, if anything?


The article itself isn't clear on what it means either.


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## azerogo (18 Mar 2020)

I think it's implying people are seeing silver as a better bet than gold for the first time.


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## Gordon Gekko (18 Mar 2020)

Buffett has said some very interesting things about gold over the years. One in particular resonates with me:

All of the gold in the world would make a giant cube, the sides of which would be 68 feet long. Imagine you owned that! You could walk around it and look at it and marvel at its splendour.

Well what if, instead, for the same amount of money you could have:
- All of the agricultural land in the USA with all that it produces
- The seven biggest corporates in the world (e.g. Exxon Mobile, Apple, etc)
- $1 trillion dollars in cash for your ‘walking around money’

Which would you prefer?


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## Acorn22 (18 Mar 2020)

Silver is in high demand as they have started to use it a lot in manufacturing now for things like chips for iphones and in the technology industry a lot - other medical devices too.  People usually associate it with jewellery and that is still true but it's sky rocketing at the moment because of manufacturing reasons.


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## RedOnion (18 Mar 2020)

azerogo said:


> I think it's implying people are seeing silver as a better bet than gold for the first time.


It's saying the opposite, no?
As in it now takes more silver than ever before to buy gold?



WolfeTone said:


> What does this signal, if anything?


Just that there's been a massive sell off of precious metals, and silver prices have fallen more than gold.
The ratio's last spike was December 2008...



kingvagabond said:


> it's sky rocketing at the moment


Silver has dropped 33% in the last month.


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## Acorn22 (18 Mar 2020)

A lot of things are dropping over the last month? China is not manufacturing much at the moment.


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## Acorn22 (18 Mar 2020)

Not only that but there are several factors that play into the projected rise of silver prices, many of which don’t have anything to do with gold:

*In a Precious Metal Bull Market, Silver Outshines Gold.* During the bull market of 1970–80, silver gained 3,105% and gold gained 2,328%. Again between 2008–2011, silver gained a whopping 448% compared with gold’s 166%.3






*2.     Global Demand for Silver Is Growing.* The demand is increasing worldwide but China and India are particularly silver hungry. In the year 2000, China’s silver demand was less than 50 million ounces. In 2016, the demand had risen to over 200 million ounces!
3.  *Global Supply of Silver Is Shrinking.* While demand is growing, the supply of silver is doing the opposite. Government stockpiles of silver topped 170 million ounces in 1996, and in 2015 they weighed in at under 50 million ounces. In addition to that, after a fall in the price of silver in 2011, silver mining was cut dramatically. Today, there is considerably less silver being mined than there was a decade ago.


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## RedOnion (18 Mar 2020)

kingvagabond said:


> A lot of things are dropping over the last month? China is not manufacturing much at the moment.


Ah, so it's the fall in manufacturing.
When did the 'skyrocketing' happen? 2011?


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## Acorn22 (18 Mar 2020)

Anyone think it's worth throwing a few bob at it now that its down?


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## cremeegg (18 Mar 2020)

kingvagabond said:


> Anyone think it's worth throwing a few bob at it now that its down?



Silver?

Google Nelson Bunker Hunt before you do


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## Acorn22 (18 Mar 2020)

cremeegg said:


> Silver?
> 
> Google Nelson Bunker Hunt before you do
> I would only be throwing a 'few bob' not a billion!


  Am I right in thinking that guy didn't diversify in the end?  He put all his eggs in the one silver basket?


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## landlord (19 Mar 2020)

The price of the paper derivative of silver for example SLV and physical silver is starting to decouple. This is important. 
I phoned Goldcore in Ireland and they had no 1oz coins left as demand is so strong. The European mint is asking for a massive 40% premium over spot, where its normally 14%. I doubt they have any  coins left either.
If the spot price of the paper derivative falls further this could push the premium of physical silver even higher.


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## WolfeTone (19 Mar 2020)

Gordon Gekko said:


> Which would you prefer?



All the land, money and gold in the world is next to worthless without a productive workforce of billions to sustaining its value over the long term. 
Maybe its time to reconsider the value of labour relative to other factors?


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## Acorn22 (19 Mar 2020)

Gold prices soared yesterday.  Gold always does better in a crash as silver is linked to industry. This crisis will be very short lived as China are now beginning to see light a the end of the tunnel.  It will be over before we know it and the factories up and running.


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## joe sod (22 Jul 2020)

Silver hit 20 dollars yesterday it's highest level in ages, its catching the gold tail wind, it's highly volatile asset though so not for the faint hearted. It's indicating though that we need to start thinking about inflation which many analysts are now talking about. With the massive government stimulus and central bank money printing its going to finally show up in higher prices. Already evidence of this in the hospitality sector once it opens fully. Also the era of a very strong dollar may be ending a bit like the early 2000s .


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## Steven Barrett (22 Jul 2020)

Gordon Gekko said:


> Buffett has said some very interesting things about gold over the years. One in particular resonates with me:
> 
> All of the gold in the world would make a giant cube, the sides of which would be 68 feet long. Imagine you owned that! You could walk around it and look at it and marvel at its splendour.
> 
> ...



In other words, have assets that are capable of producing a return while you own them. Even with negative ECB interest rates, I can earn 0.01% from my cash. With gold I get nothing until I sell it. 

Steven
www.bluewaterfp.ie


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## camlin90 (22 Jul 2020)

> In other words, have assets that are capable of producing a return while you own them. Even with negative ECB interest rates, I can earn 0.01% from my cash. With gold I get nothing until I sell it.



0.01% is your reward for handing control of your money to a bank who can lend as they please. Banks have failed, as us Irish should well know. Last time depositors were lucky enough to get bailed out at the expense of other taxpayers, but the ECB have said any similar future crisis will involve "bail-ins", as happened in Cyprus.

If you consider 0.01% adequate reward for that risk - fair enough. The bad news is pension cash funds are already paying negative interest along with personal deposits in several Eurozone countries.

Equities and bonds again involve giving your money to somebody with no guarantee of getting it back. 

Gold and silver are comparable with a 50 euro note, which yields no return. The problem with the 50 euro note is the ECB can produce billions more at the touch of a button, which they have been doing throughout the COVID situation.


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## tecate (22 Jul 2020)

SBarrett said:


> In other words, have assets that are capable of producing a return while you own them. Even with negative ECB interest rates, I can earn 0.01% from my cash. With gold I get nothing until I sell it.


Surely all assets have their own merits and there's a place for hedging risk and diversifying?


camlin90 said:


> 0.01% is your reward for handing control of your money to a bank who can lend as they please. Banks have failed, as us Irish should well know. Last time depositors were lucky enough to get bailed out at the expense of other taxpayers, but the ECB have said any similar future crisis will involve "bail-ins", as happened in Cyprus.


History continually repeats itself in that department. People in countries that have known relative stability are complacent - although I have no earthly idea why - as the Greece/Cyprus scenario and Euro crisis isn't that long ago.



camlin90 said:


> Equities and bonds again involve giving your money to somebody with no guarantee of getting it back.


That's very true - albeit people should note it's also an issue with 'paper gold'.  The ratio of paper gold to physical gold is believed to be in the region of 200-250:1.  It's quite difficult to get your hands on physical gold and there are difficulties around moving it and storing it. Some studies put the paper silver to physical silver ratio at in excess of 500:1.  Can anyone really be sure that physical reserves are there to meet paper silver/gold?  A couple of weeks ago, it emerged from Wuhan, China that 83 tonnes of fake gold were being used as collateral.



camlin90 said:


> Gold and silver are comparable with a 50 euro note, which yields no return. The problem with the 50 euro note is the ECB can produce billions more at the touch of a button, which they have been doing throughout the COVID situation.


The temptation at any given time for governments/CBs to tamper is too great. I've been trying to follow this whole modern monetary theory/rampant money printing deal in these virus days.  There has been very little commentary from CB circles about the dangers. However, the Governor of Australia's Reserve Bank came out the day and stated exactly that.


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## cremeegg (22 Jul 2020)

camlin90 said:


> Gold and silver are comparable with a 50 euro note, which yields no return. The problem with the 50 euro note is the ECB can produce billions more at the touch of a button, which they have been doing throughout the COVID situation.



You can always settle a €50 tax bill with a €50 note. Who knows what you can do with an ounce of gold.


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## tecate (22 Jul 2020)

cremeegg said:


> You can always settle a €50 tax bill with a €50 note. Who knows what you can do with an ounce of gold.


When sovereign currency was backed by gold (pre-'71), it would be akin to the same thing I guess (to a degree, there's still counterparty risk) - and that would get over golds lack of utility as money due to non-divisibility.  Everything has its own merits - clearly that's one for a €50 note. However, I'd hope that nobody here has to hand over all of their wealth in tax.  I don't think it's a case of anyone having or wanting to hold just one asset. Monetary metals like gold and silver can have their place and the individual can still be in a position to settle that €50 tax bill with their €50 note.


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## tecate (27 Jul 2020)

Both gold and silver have now responded to the unprecedented money printing - with gold hitting a historic record high.


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## WolfeTone (27 Jul 2020)

Bitcoin not doing too bad either.


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## Allpartied (28 Jul 2020)

Not a big fan of gold or hedges like this. I suppose if the world goes mad and govt hands out checks for a million quid to everyone, it might be useful.

 Is there really any sign that money printing, or QE or any other fancy mechanism is going to produce inflation.  I mean normal inflation, 3 or 4 %.  Hyperinflation looks even more unlikely.  

Is there any sign that people are going to spend quickly, in large numbers across developed economies.  Is the velocity of money going to increase, because the govt increases bond buying, or backs loans in dodgy derivatives? At the moment people are fearful, uncertain and will likely hold on to cash. This will, likely, produce deflation and make cash more valuable than any commodity. 

Japan has been printing money, borrowing like good o, and no inflation, not a jot. 

Everyone points to the German experience in the 1920's, but the circumstances were entirely different and nothing to do with the type of fiscal stimulus being advocated in Europe and US. In more recent times hyperinflation is found in countries who have been subjected to embargoes or sanctions or have been unable to collect their taxes properly. 

The boom in gold and silver, look like bubbles to me.  As for Bitcoin, it's become a joker in the pack,  surging up and down in value for no apparent reason.


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## joe sod (28 Jul 2020)

Allpartied said:


> because the govt increases bond buying, or backs loans in dodgy derivatives? At the moment people are fearful, uncertain and will likely hold on to cash.


Governments issue bonds, they don't buy them, I doubt the Irish government has ever bought a bond ever, central banks are the main buyers which they print cash to buy , therefore every time they buy a bond they have increased the money supply. In 2008 most of that cash was swallowed by the banks to shore up their balance sheets, now the governments are giving that cash directly to people it's going straight into people's pockets, that will be inflationary especially when the economy opens fully and is not restricted.
The reason why we did not have much inflation up to now is because of the entrance of China and cheap manufacturing, but that is also ending with the looming trade wars which are escalating and now some countries are stripping Chinese technology out of their telecoms networks. Therefore the China effect is being reversed


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## tecate (28 Jul 2020)

Allpartied said:


> Not a big fan of gold or hedges like this. I suppose if the world goes mad and govt hands out checks for a million quid to everyone, it might be useful.


You don't have to dominate your wealth with disproportionate amounts of gold/silver. As regards cheques, what government hasn't pushed out free money?  The free money cheques are coming to an end in the US but they're expected to renew that deal.



Allpartied said:


> Is there really any sign that money printing, or QE or any other fancy mechanism is going to produce inflation.  I mean normal inflation, 3 or 4 %.  Hyperinflation looks even more unlikely.


I've been trying to get my head around this over the last few months but not much more the wiser.  The reality is that we have not had this level of money printing before - it's unprecedented.  Therefore, nobody really knows. There was no inflationary wave following the use of QE after the last financial crisis - but then economies never got weened off QE.  Apparently, that's going to be an ongoing problem.
The distribution of the free money was confined to the banking system back then - there was no PPP or free money cheques arriving in the mail. Even if they manage to work their way out of this relatively unscathed, the practice is inequitable with those closest to the free money faucet benefitting most (The Cantillon Effect).



Allpartied said:


> At the moment people are fearful, uncertain and will likely hold on to cash. This will, likely, produce deflation and make cash more valuable than any commodity.


There's a case being made that tech is making deflation an inevitability.  However, monetary metals can still be a hedge in this instance too...if we're going to have negative interest rates.



Allpartied said:


> Japan has been printing money, borrowing like good o, and no inflation, not a jot.


I don't claim to fully understand it but some commentators make the point that the Japanese scenario is somehow unique in that their debt is owned within Japan.



Allpartied said:


> As for Bitcoin, it's become a joker in the pack,  surging up and down in value for no apparent reason.


There's a logic to it.  Bitcoin is comparatively young relative to gold/silver/sovereign currencies. Volatility is part of its evolution. It has already been shown to have reduced its rate of volatility - and that will continue over time as its market cap expands and price discovery continues.  When you zoom out, you see the higher lows that bitcoin puts in year-on-year. That's symptomatic of it grinding out its place in the world and due to it having a fixed cap supply.


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## WolfeTone (18 Aug 2020)

Allpartied said:


> Is there really any sign that money printing, or QE or any other fancy mechanism is going to produce inflation. I mean normal inflation, 3 or 4 %.



Yes, I would have thought the same, but now I think it just props up asset prices. I see that RTE is reporting that houses prices here have increased last month, albeit by 0.3%.
First monthly increase since January
The report is interesting insofar that global economies are falling off a cliff and even at our national level, house price sales have crashed by 33% yoy.
Despite this, house prices went up in July! Does not make sense to me.


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## tecate (18 Aug 2020)

WolfeTone said:


> Yes, I would have thought the same, but now I think it just props up asset prices. I see that RTE is reporting that houses prices here have increased last month, albeit by 0.3%.


House prices can go up and it doesn't affect the reported inflation rate given that CPI doesn't take account of assets.


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## WolfeTone (18 Aug 2020)

Yes I know, it's the fact that house prices have risen in the midst of the fastest economic slowdown ever that has me perplexed. Sales of houses fell 33% yoy, yet four months into this health crisis and prices are going up?


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