TRUE DOLLAR JOURNAL

The gold-to-silver ratio is the amount of silver in ounces one ounce of gold will buy. Said another way, the ratio is the amount of silver in ounces it takes to sell for cash to buy one ounce of gold. Many believe a high ratio means it is a signal to buy silver and thus conversely, a low ratio means it is a signal to buy gold. To calculate the ratio, divide the price of gold by the price of silver.



The Silver-Needed-to-Buy-Gold ratio over the last 30 years hit an all-time low at the start of April 2011. Right now, using true prices, it takes 5.9 ounces of silver to buy an ounce of gold. Since hitting the all-time low, the number of ounces of silver needed is growing at the yearly rate of 11.7% having grown over the last 15 months 34.3%

Year over year, December 2013 to December 2014, the number of ounces of silver needed to buy an ounce of gold has grown even faster, at the yearly rate of 13.8%, having grown 15%. Anyone who plays the gold-to-silver ratio who trades silver for gold should buy gold and sell silver.

If there were merit in this Silver-Needed-to-Buy-Gold ratio, you could look at it in other ways. If you were a gold only owner, a high ratio could signal to sell gold.  If you were a silver only owner, a low ratio could mean to sell silver but not buy gold.

Hucksters will use any marketing ploy whatsoever to get others to buy what they sell. Gold and silver hucksters are no different.

Gold and silver hucksters claim the long run average of the gold-silver ratio is 16:1.  To buttress this claim, they reference workers at the U.S. Geological Survey whohave estimated that there is 17.5 times more silver in the Earth’s crust than gold. So all things being held constant (ceterus paribus as eggheads like to say) such as population growth and extraction rate, some claim the ratio ought to be 17.5 to 1, always.

It is from this outlandish claim that gold and silver hucksters try to get anyone to buy either silver or gold.

Yet, the picture of the true price of gold and true price of silver tells another story. After hitting a peak at the start of February 1991, the number of ounces of silver needed to buy an ounce of gold has fallen, -6.4% a year from the peak to the low hit at the start of April 2011.

In the first major drowning wave, between February 1991 to April 1994,  the number of ounces of silver needed to buy an ounce of gold fell at the year rate of -18.3%, falling -48.2%. When the second drowning wave came between July 1997 and February 1998, the number of ounces of silver needed to buy an ounce of gold fell at the year rate of -56.1%, falling -42.2%. The third drowning wave came between February 2003 and December 2006, falling at the yearly rate of -13.8%, falling in total -44.0%. When the last drowning wave hit between October 2008 and April 2011, the number of ounces of silver needed to buy an ounce of gold fell at the year rate of -37.3%, falling -70.1%.

Over the last 30 years, the number of ounces of silver needed to buy an ounce of gold has increased only 1.9% of the time.

So what does all of this mean? Well, it means that over the last 30 years, since gold has long lost its monetary function, gold become like every other commodity.

Gold has commercial uses (jewelry) and industrial uses (plating). Accordingly, the price drivers for gold are the winning bidders who need gold for commercial and industrial uses.

And the same can be said for silver. Even longer than gold, silver long ago lost its monetary function. And like gold, silver is mere commodity.

So here are what the true prices look like for silver and gold.





Silver and Gold
Silver and Gold
Everyone wishes for Silver and Gold
How do you measure its worth?
Just by the pleasure it gives here on Earth
Silver and Gold
Silver and Gold means so much more when I see
Silver and Gold decorations on every Christmas tree
Silver and Gold
Silver and Gold
Everyone wishes for Silver and Gold
Silver and Gold
Silver and Gold means so much more when I see
Silver and Gold decorations on every Christmas tree