One of the most common questions I get is: What should I buy today — silver or gold?
Right now, I have a clearer answer for you than I usually do. That’s because the ratio of gold to silver is near an extreme point.
You see, the prices of gold and silver move up and down in cycles, like all commodities. However, they don’t always move together. Since 1990, it took, on average, 66 ounces of silver to buy an ounce of gold. That’s based on the price in U.S. dollars.
Today, we are at an extreme, as you can see in the chart below:
Right now, an ounce of gold costs around $1,250, and an ounce of silver costs around $16.70. That means it would take around 75 ounces of silver to buy an ounce of gold. That’s a lot. The most ever was 99 ounces of silver, back in 1991.
If you’d bought silver in 1991 and held it to 1998, you would have made good money. The silver price doubled from $3.62 per ounce to around $7.25 per ounce over that period. The gold price went up too … by 16%.
The same thing happened in 2008, when the ratio hit 84.5 ounces of silver per ounce of gold. The price of silver went from $10 to over $48 per ounce. That’s a 380% increase. The price of gold doubled over that same period.
This is a ratio, so the price of silver doesn’t have to go up for the ratio to change. But historically, that is what’s happened when we hit this kind of extreme. Since February 2016, the ratio fell from 83 to 75. The price of gold is up $20 over that period … 2%. The price of silver is up $2 per ounce … 14%.
It looks like history is repeating itself, which is good news for our wallets.
Good investing,
Matt Badiali
Editor, Real Wealth Strategist
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