Gold vs Silver

When investing in precious metals, gold vs silver, gold is the undisputed champion. However the question is silver a good investment and the answer by experts has been a resounding yes.  Silver has several advantages. One advantage is that silver is less expensive than gold, so first time investors or people on tight budgets can more easily invest in silver while spending significantly less than they would on an investment in gold.

There is a debate amongst some financial experts on whether the price difference between silver and gold is fair. Specifically, some believe that silver is undervalued, and that the ratio of gold prices to silver prices is going to decrease. Today, that ratio is about 53:1 in favor of gold, meaning gold is roughly 53 times more expensive than silver. That ratio has been the average for the past 4.5 decades, with wide swings in both directions. However, gold was not always so dominant.

In medieval Japan, the ratio of gold price vs. silver price was 3:1 in favor of gold. Silver was valued more on a level with gold as there were not many known silver mines in the area, so the metal was more rare. In ancient Egypt, the ratio was even closer at about 2:1 in favor of gold. There may have even been times throughout history when silver was valued at a higher rate than gold, again due to the lack of mines and rarity of the metal.

However, over time, silver was found in greater abundance than gold across the world. In medieval Europe, the price ratio was 10:1 in favor of gold, and rose to 15.5:1 in 19th century England. This ratio, incidentally, is also the approximate ratio of silver to gold in the earth’s crust, meaning there is more silver. The ratio increased even more in the USA around the turn of the 20th century to 16:1, when the ratio was legal set at that rate.

The ratio peaked at close to 100:1 in the late 1930s, and again in 1991 at about 90:1 in favor of gold. It has been steadily stepping downwards in the past 20 years to the level we see today.

The rise over time of the gold price as compared to the silver price leads some to believe that silver investors will soon benefit, as the ratio will decrease and silver will gain value comparatively. However, only time will tell.

About Eric Griffin

Eric Griffin is the President and Co-Founder of www.GoldAndSilverOnline.com. Eric has been around the precious metals business since 1995 when his father started a leading nationwide precious metals dealer. While getting a finance degree from Arizona State University he helped his father with operations but decided to go into banking and finance when he graduated in 2002. He soon found his way back to the precious metals industry, and has written commentary, managed precious metals websites and managed clients portfolios for many years before opening GASO. Eric has a strong grasp on economics as well as a deep understanding of the precious metals markets. If you have any comments or questions don’t hesitate to respond to any of his blog post.

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