There has been much conjecture about whether gold or silver is the better investment vessel. Some quarters are in favor of silver as they feel that the ratio of 16 to one favors investing in silver in contrast to investing in gold. It can be argued that silver coins will be recirculated and used for smaller purchases, and that gold will be used for much larger purchases. This would be similar to back at the turn of the 18th century when the monetary system was first established in America.
As gold is trading at $1900 per ounce and silver is at $45 per ounce that gives a ratio of 46. Therefore, even though silver is appreciating at a rapid rate, it still has to appreciate at a faster rate in order to get to the ratio of 16 to 1.
It is believed that the gold silver ratio will stabilize at 16 to 1. Other quarters believe that there are numerous flaws with this thinking and that there are pitfalls that could affect investors rather adversely. In the past, the ratio has been 15 to 1, and this has been based on an average over the last 140 years. When gold has been high, silver has traditionally been low. There have been converse figures to this ratio in that the ratio has changed as silver has increased in value, and gold has reduced slightly.
The gold silver ratio has been falling over the past two decades and should this continue to be the case, there could be rather dramatic reversals of the ratio. The volatility of metal has been based more on emotions than the simple laws of supply and demand.
It can be expected that emotions and volatility will continue to dominate these markets. Reversals will occur like a thief in the night and could happen due to a crude joke. Rumours have great power, and they tend to make people do weird things in the wonderful world of investing. Someone could start a rumour that notes will be printed in gold units and therefore, there will be no need for silver coins anymore. Likewise, someone could spread the rumour that more gold has been found from when the Japanese looted Asia during the Second World War (WWII). It could also be rumoured that China intends buying all the gold and silver in America. These kinds of rumours have a drastic effect on investor’s investing habits, especially when it comes to gold and silver investment.
Hoaxes have much power as all it takes is someone who is influential to say something with authority and people start panicking. This was proven in no small way when a leading TV personality spread the word that there was a toilet paper shortage, within 24 hours all toilet papers had been bought up and there was no toilet paper to be sold in stores for the next thirty days. This is why any information should be checked and double checked before taking any action. Failing to pay attention to this could result in investors making decisions based on lies. Needless to say however, the true silver investor tends to ignore these rumours and chooses to focus on acquiring as much physical silver as possible before the “paper gimmick” comes to an end.