The Silver to Gold Ratio, as Undervalued as at Anytime in History

by Andy Hoffman

Despite unprecedented market rigging, precious metal holders are clearly back in the driver’s seat, and currency markets are again in a state of crisis, led by Brazil. Interest rates continue to drop, despite the relative market calm.

Both gold and silver have been undervalued in recent years; recently, silver’s relative underperformance has been dramatic. This, at a time when the global economy has plunged, with countless currencies following suit, and ‘Trump-flation’ trade igniting a base-metal bubble that silver did not participate in.

Meanwhile, both political and geopolitical risks have increased, and both gold and silver passed peak production levels in 2015, with no possibility of a material rebound for the foreseeable future. This, as aboveground, available-for-sale inventories have dwindled.

In other words, not only is silver’s supply/demand balance more bullish than at any time in the post-War era, but the monetary reasons to own silver have never been more urgent.

The gold:silver ratio traded much closer to its historical average of 15:1 before the COMEX worked its magic on the canary in the silver mine. This was based on the historic gold:silver production rate, which has plunged from 15:1 to around 9:1. Over the past two decades, the only times the gold:silver ratio has traded in the 75-80 range were the peak of the dot-com economy in the late 1990s, the aftermath of the post 9/11 paper precious metals crash, the paper raids at the onset of the 2008 financial crisis, and now.

The odds of the gold:silver ratio materially declining in the coming years is as high as at any time in recent memory, yielding a significant, potentially historic silver investment opportunity, given the aforementioned political, economic, mining industry, and monetary fundamentals.

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