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Gold and Silver update April 27 2025
Humm, what should I do?
Historical Precedent spells opportunity
I have covered gold here in Money Matters on numerous occasions and the price of gold certainly has been on a tear as of late. Up from the few hundred bucks an ounce in the 1970’s, it has recently reached new high after new high, blasting through the $3,000/ounce level last month and now stands 10% higher in the $3,300/ounce range.
Gold is thought of by many investors to be an inflation hedge. Monetary authorities throughout the world also pay attention to, and acquire the yellow metal for their sovereign investments. This means that certain countries may buy gold for their own government accounts using their “central banks” to do so. A central bank is a “country’s official government bank” sort of speak, and these banks control the supply and issuance of each countries respective currency.
Not talked about as much however, is golds cousin, silver. Silver may also be thought of as a possible inflation hedge, and is sometimes called the “poor man’s gold”.
It is called that as silver is a heck of a lot cheaper than gold, clocking in at $33/ounce as the time of this writing. With gold around $3,300/ounce, that makes the current price ratio of gold to silver about 100 to 1. This means one could buy either 100 ounces of silver or one ounce of gold.
This 100 to 1 ratio is, to say the least, more than out of skew with historical ratios of gold to silver.
Those living in Nevada County in Northern California might have heard of the 16 to 1 mine (16:1) located in Alleghany, California. The gold mine was shut down in 1965 and was named 16:1 to reflect the price ratio of silver to gold that existed many decades ago.
When I was growing up and through my teen years, because I had an interest in economics since my childhood (odd I know), I was familiar with this 16:1 ratio back then and indeed, throughout my entire life.
Over the decades since the 70’s, the ration of gold to silver has been on a seemingly relentless climb with only brief pullbacks. Having reached almost 100 to one way back in the 1940’s, it pulled back in the 16:1 range around 1968.
Needless to say, at a ratio of 100 to 1, the ratio has rarely been higher and when it reaches these levels, historically one of two things happens. Either the price of gold falls to bring the ratio more in line with the averages or the price of silver rises.
Although the ratio could go higher still, looking at a 100 year chart, we are definitely at the top of its ratio range.
Many of the newsletters and articles I see from within my circles have noticed the data and are calling for a spike in silver prices. I tend to agree and indeed, the price of silver has been rising. Having sold at under $8 bucks/ounce in 2002 and almost cresting $50 bucks/ounce in 2011, it has visited the $20 range a few times since then. Only recently has it been rising past $30/ounce and some say it is destined for much higher prices.
Realizing the gold to silver ratio is almost as high as it’s ever been in the last hundred years or so, the recent rise in silver prices along with a very high gold to silver price ratio could mean the poor man’s gold (silver) is ready to run. Some analysts are calling for a $50/ounce price with a year and I have seen as high as $5,000/ounce may be in the cards sometime in the future.
That said, silver could reverse course and fall back to wherever, and gold could come crashing down, bringing the gold to silver ratio back to within normal range.
In conclusion, one can never tell if markets will stretch even more out of whack compared to historical precedents or be setting up to bring in enormous profits to those who notice such things.
In the end however, buyer beware is always in play. Markets have risk and investors can lose some or all of their money playing them. It is always wise to seek out the help of an investment professional to better understand markets and their movements. Either that or contain your investing to FDIC insured products which may protect your principal no matter what happens.
“Watching the markets so you don’t have to”
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(As mentioned please use the below disclaimer exactly) THANKS (Regulations)
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services. Email: news@moneymanagementradio.com
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marc
