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Question: Do you think silver is worth too little or gold is worth too much?
Silver is grossly undervalued relative to the price of gold. - 20 (37.7%)
Gold is hyperinflated, silver price is about right and the gold bubble will pop. - 8 (15.1%)
Silver and gold prices aren't tied to one another at all. - 4 (7.5%)
Both: gold is overvalued and silver is undervalued, they'll meet in the middle. - 6 (11.3%)
Neither, 40:1 will be the new stable ratio. - 0 (0%)
Both are overvalued. - 12 (22.6%)
Silver is overvalued, gold's valuation is correct. - 3 (5.7%)
Total Voters: 52

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Author Topic: Silver undervalued or gold overvalued?  (Read 9375 times)
enmaku
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July 30, 2011, 10:05:11 PM
 #1

So historically, there has been a value ratio between gold and silver, with gold typically being worth ~16 times as much as silver. This has been the status quo for well over a century as best my research can turn up, but right now gold is worth almost 40 times as much as silver. The question is, are gold prices too high or are silver prices too low? Would you expect silver to eventually rise to 1/16 the current gold price or would you expect gold to crash to meet 16x the current silver price?

Pure speculation, I know, and my holdings in precious metals are pretty evenly divided between the two but I'm posting out of pure curiosity what the temperature of the market is at present.

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The_JMiner
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July 30, 2011, 11:14:42 PM
 #2

Silver is undervalued while gold is overvalued. Gold is spiking because of this debt crisis talk.

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July 30, 2011, 11:17:35 PM
 #3

Silver is undervalued while gold is overvalued. Gold is spiking because of this debt crisis talk.

Ah, that's an option I hadn't considered... I'll add it to the available choices Smiley

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July 30, 2011, 11:19:05 PM
 #4

15x is not the historical ratio, at least not for quite a while.

Here is the last 20 years of the gold-silver ratio:


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July 30, 2011, 11:23:54 PM
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I will *never* touch silver again because of the Hunt brothers debacle. It will happen again.

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bitdragon
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July 30, 2011, 11:32:59 PM
 #6

Silver overvalued and I did not find that one in the options listed.

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July 31, 2011, 12:06:09 AM
 #7

Silver overvalued and I did not find that one in the options listed.

Added. The options are growing thick up there...

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July 31, 2011, 12:08:30 AM
 #8

15x is not the historical ratio, at least not for quite a while.

Here is the last 20 years of the gold-silver ratio:



The last 20 years doesn't undo the last 200 though. Bubbles have been known to last longer from time to time.

bitminers
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July 31, 2011, 12:13:12 AM
 #9

I will *never* touch silver again because of the Hunt brothers debacle. It will happen again.

Hi Smalleyster, what happened with silver? are you talking Physical or Paper Contracts?

Thanks!
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July 31, 2011, 12:34:22 AM
 #10

http://en.wikipedia.org/wiki/Silver_Thursday

http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt

http://en.wikipedia.org/wiki/Cornering_the_market#1970s:_The_Hunt_brothers_and_the_silver_market

http://en.wikipedia.org/wiki/Silver_as_an_investment

I bought at $15 and had to sell at $7

Never again!

Feel like investing in a Miner?:
http://bitcointalk.org/index.php?topic=30044.msg377773#msg377773
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nafai
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July 31, 2011, 03:00:00 AM
 #11

Hey thanks for that link to wikipedia, proves my point even more!

Year   Silver price (yearly cum. avg.[8])
US$/ozt   Gold price (yearly cum. avg.[9])
US$/ozt   Gold/silver
ratio
1840   1.29   20   15.5
1900   0.64   20   31.9
1920   0.65   20   31.6
1940   0.34   33   97.3
1960   0.91   35   38.6
1970   1.63   35   22.0
1980   16.39   612   37.4
1990   4.06   383   94.3
2000   4.95   279   56.4
2005   7.31   444   60.8
2009   14.67   972   66.3
2010   20.19   1225   60.7
2011 (cum. thru 19 May)   39.22   1510   38.5

The gold-silver ratio hasn't been 15-to-1 for over 100 years according to that chart.

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Smalleyster
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July 31, 2011, 03:03:07 AM
 #12

Hey thanks for that link to wikipedia, proves my point even more!

The gold-silver ratio hasn't been 15-to-1 for over 100 years according to that chart.

Who cares about the ratio? If you invest in silver you are setting yourself up to be Hunt'ed!

Feel like investing in a Miner?:
http://bitcointalk.org/index.php?topic=30044.msg377773#msg377773
A soup to nuts newbee system for a secure, portable USB wallet (free instructions):
NoobHowTo: http://bitcointalk.org/index.php?topic=27088.msg341387#msg341387
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July 31, 2011, 03:09:31 AM
 #13

i think both are overvalued as is platinum and palladium. as much as id love to buy into precious metals, i think they are in a bubble right now...prices got driven up during and after the housing/banking crash from a influx of new investors...

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July 31, 2011, 04:06:24 AM
 #14

The poll is missing an option:

Silver is seriously undervalued while gold is slightly undervalued.

In my opinion, this is the correct scenario.

nafai
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July 31, 2011, 04:10:07 AM
 #15

Quote
Who cares about the ratio?

Well, that IS the topic of the thread...

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foggyb
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July 31, 2011, 04:41:42 AM
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“The Hunts Tried to Corner the Silver Market” Myth

https://meltdown2011.wordpress.com/2008/08/20/the-hunts-tried-to-corner-the-silver-market-myth/

"Is it too much to ask, if you buy a car from a guy, and you pay him the cash and he signs over the title, that you might get the car? This, ladies and gentlemen, is all the Hunts ever asked. They did not ever “corner” the silver market. All they asked was for the bullion dealers to keep their promises, and deliver."
evolve
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July 31, 2011, 06:12:37 AM
 #17

The poll is missing an option:

Silver is seriously undervalued while gold is slightly undervalued.

In my opinion, this is the correct scenario.




why? i want to hear from anyone that feels that precious medals are undervalued....i seriously would love to be able to justify buying in right now, but the market seems waaaaay overvalued to me.
nafai
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July 31, 2011, 06:26:07 AM
 #18

Quote
why? i want to here from anyone that feels that precious medals are undervalued....i seriously would love to be able to justify buying in right now, but the market seems waaaaay overvalued to me.

I believe that precious metals are currently undervalued.  More to the point, I believe that the US dollar is currently overvalued (which is the same thing).

The bull market in commodities in general, and PMs in particular, is driven by fundamentals relating to the US dollar, specifically US monetary policy.  The fundamentals have not changed.  If anything, they are accelerating.

As long as the Fed continues injecting liquidity (read: inflation) into the economy through quantitative easing, bailouts, and other programs, whilst simultaneously keeping interest rates artificially low, the USD is going to continue to undergo currency devaluation.

The bull market in PMs in the 70s correlated very strongly to the stagflation of the period.  The bull market in PMs only ended when they brought Volcker in as Fed chairman who raised interest rates to 20%.  I don't see the current bull market in precious metals ending until/unless we see a similar rise in interest rates.

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The_JMiner
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July 31, 2011, 06:41:05 AM
 #19

Hey thanks for that link to wikipedia, proves my point even more!

The gold-silver ratio hasn't been 15-to-1 for over 100 years according to that chart.

Who cares about the ratio? If you invest in silver you are setting yourself up to be Hunt'ed!


How can ANYONE compete against massive industries that need silver?  Silver is the best conductor of electricity. It not like the 80s when there was no electronics. Silver is every where now, Biomedical (silver kills bacteria), electronics,  even xray film is silver. There is a limited supply and we are eating through it (industries) quite rapidly.  Gold on the other hand gets mined and put in a vault so we know it is still there not being consumed.  I understand the whole thing that happened with silver before but I do not see anyone large enough to compete with corporations that need it for their gear.

The_JMiner
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July 31, 2011, 06:42:09 AM
 #20

Quote
why? i want to here from anyone that feels that precious medals are undervalued....i seriously would love to be able to justify buying in right now, but the market seems waaaaay overvalued to me.

I believe that precious metals are currently undervalued.  More to the point, I believe that the US dollar is currently overvalued (which is the same thing).

The bull market in commodities in general, and PMs in particular, is driven by fundamentals relating to the US dollar, specifically US monetary policy.  The fundamentals have not changed.  If anything, they are accelerating.

As long as the Fed continues injecting liquidity (read: inflation) into the economy through quantitative easing, bailouts, and other programs, whilst simultaneously keeping interest rates artificially low, the USD is going to continue to undergo currency devaluation.

The bull market in PMs in the 70s correlated very strongly to the stagflation of the period.  The bull market in PMs only ended when they brought Volcker in as Fed chairman who raised interest rates to 20%.  I don't see the current bull market in precious metals ending until/unless we see a similar rise in interest rates.

Agreed. They keep pumping the dollar , commodities keep going up up and away.  Look at the dollar index it is so low even before the debt talks.

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