The Gold/Silver Ratio (GSR) is currently more or less 52:1, which is a sure sign that investors must buy silver, because given an average gold/silver ratio of more or less 1:15 over the past 5000 years, silver is clearly greatly undervalued relative to gold.
If we take the current gold price of $1767.60 an ounce and divide it by the current silver price of $33.98 an ounce (taken on Nov 15, 2011 at 00:13 New York Time), then we get to more or less 52, which gives us a Gold/Silver Ratio (GSR) of 1:52. This means that for the price of an ounce of gold, one can currently buy more or less 52 ounces of silver. However, as noted above, the historic average of more or less 1:15, is a sure sign that the current Gold/Silver Ratio (GSR) of 1:52 is simply too high. Given the mentioned price levels and a historic average of more or less 1:15, either the gold price has to come down to levels closer to $500 an ounce of gold or the silver price has to increase to levels closer to $118 an ounce of silver. If we’re brutally honest with ourselves, it is highly unlikely that gold will fall to a price level even close to $500 an ounce, especially considering that most mainstream experts now predict a gold price of more or less $2000 an ounce sometime next year. If gold hits the $2000 an ounce mark, silver must at least trade at $38 an ounce to maintain the current Gold/Silver Ratio (GSR) of 1:52. At a silver price of $38 an ounce, one can roughly expect to pay between $55 and $60 an ounce for physical silver, especially in the form of 1 oz silver bullion coins such as American Silver Eagles. It is after all no secret that an American Silver Eagle currently costs anything between $45 and $55 per coin. The substantial premiums over the spot price of silver and the high Gold/Silver Ratio (GSR) are sure signs of silver market manipulation, which gives the true silver investor the opportunity to acquire or buy physical silver at dirt cheap levels. The secret, like noted before, is to avoid paper silver like the plague itself and to stick with physical silver, especially in the form of silver bullion coins.
Now at some stage or another, the Gold/Silver Ratio (GSR) has to return to levels closer to the average history level of 1:15. If the gold price increases to $2000 an ounce next year as expected by the experts, it means that silver will have to increase to more or less a $133 an ounce to reflect a Gold/Silver Ratio (GSR) of 1:15. Thus, the silver price is expected to increase to anything between $38 and $133 an ounce next year, which makes the current silver price of more or less $32 an ounce very attractive, not even considering other reasons why investors must buy or acquire silver, physical silver that is.