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When will silver catch up with gold’s stunning $100 advance?

By: Peter Cooper

-- Posted 11 August, 2011 | | Discuss This Article - Comments:

The gold price shows every sign of going exponential as predicted by Jim Sinclair (click here). We have surged from $1,700 past $1,800 in a matter of days, so much for the normal low season in the summer for precious metals.

Silver has lagged behind and even slipped back a bit over the same period, albeit not dramatically from $42 to $39 at the time of writing. Then again in the run-up to the $1,700 gold price silver delivered almost twice the price gain of gold (click here).

Silver best buy

So what we have is a picture of volatile price movements, with gold and silver occasionally swapping places as the lead precious metal. Logically then with gold out front now, silver is the better buy and due for an upswing.

Why are these two precious metals so inter-linked? Well basically because they are both monetary metals, although both also have industrial and other uses. There are no other monetary metals.

Silver is often tagged as ‘poor man’s gold’ because it is so much cheaper than gold. Yet that gap has been closing for some years. The gold:silver ratio of three years ago was around 80, now its a little over 40.

Over the centuries the average gold:silver ratio is 12-16 and as gold increasingly becomes the currency of choice again we can expect to see this historic relationship resumed. Silver reserves are also much smaller than gold reserves and that is a key determinator of the supply/demand price dynamic as Eric Sprott recently pointed out (click here).

Higher than gold?

If you are really bullish on silver like author Mike Maloney then you can envisage silver one day being worth more than gold (click here). That still sounds a bit far fetched but the notion of silver outperforming gold in the coming precious metal bubble is not hard to imagine at all.

Perhaps over the past few days silver has sold down because it is also an industrial commodity. But it is not down by nearly as much as oil, for example, and is being supported by buyers who see it as a precious metal.

Also there might have been a temporary shift into gold from silver as a safe haven trade. But if so this is only a buying opportunity for what promises to be the best investment this year and most likely the next few years too. Buy now, these prices can not last much longer (click here).

-- Posted 11 August, 2011 | | Discuss This Article - Comments:

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