There was a long article somewhere, maybe on Kitco, sort of "debunking" the gold silver ratio business.
At a few times in the middle ages, silver was worth maybe 20% more than gold.
The ratios tend to be set by a combination of end use demand, and mining supply, both of which are tied to the level and type of technology for material use and mining technology.
This technolgy tends to stay the same for years, then change suddenly - like the "punctuated equilibrim" models in ecology.
One huge change compared to the middle 1800s - the operation of gigantic open pit mines for base metals, like copper, with silver and gold as byproducts.
The other changes would be -
1) the extensive use of platinum and other PGMs for uses that once tended to belong to gold, such as electrical relay
contacts
2) The development of cyanide heap leaching for desiminated gold deposits. This has seriously increased the gold supply, and reduced the cost.
I will agree with TJ that silver is a much smaller and easier to influence market than gold.
Gold gets stored in vaults - when the price is high enough, it will come out of vaults. Silver gets used in solder in your refrigerator and other places where it is a real hassel to recover it.
When twenty ounces of gold buys an E-class Mercedes Benz, the vault doors will open. Conviently denominated coins, in standard weights, some sealed in plastic should be easy to sell.
When silver starts heading up, who's going to trash their refrigerator for 1/4 ounce of silver, even if silver is $100 an ounce ? Who's going to buy it ? |
