Help Me Understand The Correlation Between Gold And Silver

Hello, Jeff, and welcome to the CCF forum!

As Fredd says, there is no direct correlation between gold and silver prices but there has been a historical relationship between their prices based on the fact that both gold and silver have been used as money for thousands of years.

The ratio of the value of gold to that of silver has varied from about 10 to 1 all the way up to 100 to 1. For a considerable portion of that time, it was in the 15:1 to 25:1 area. These ratios tell us how many ounces of silver it takes to buy an ounce of gold. Currently, that ratio is fairly close to 50:1, so it takes about 50 ounces of silver to buy an ounce of gold. This is relatively expensive in terms of silver, although it has been higher than this not too long ago.

It is interesting that the production quantity ratio of silver to gold is running about 9.5 to 1, so for every 2 ounces of gold that are produced, 19 ounces of silver are produced. Some people believe that the price of these metals should reflect their scarcity and production rates but there is more to this issue than that. Palladium, for example, is MUCH more rare than gold yet costs about $1000 an ounce less than gold.

As you can see, this is a complex issue with many facets. If you are really interested in this, do some research on-line to find more information about it. Both gold and silver have lots of info available and there should be some on platinum and palladium as well. The silver institute is a really good source of info on silver. There is probably an equivalent site for gold as well.

I'll add another

Ed_B said it well.

The two metals don't have a lot of correlation besides the fact that when there's a lot of demand for precious metals in general, you get more potential buyers of all metals. Some are more popular than others at times.

Platinum was very recently double the price of gold, but is now trading lower.

Bottom line, all the metals are pulled by supply, demand, and the market 'freak-out' factor of the time.

WELCOME JEFFNASH!

The only relation that it has now a days is that over the last 10 years they have both been moving up together. However the previous 20 years we saw silver stay fairly flatlined while gold broke away and gradually increased in value while the dollar lost it's purchasing power. You will here the phrase, "silver to gold ratio" as Ed_B pointed out to you, about historically being about 15:1 for thousands of years. The only thing he left out was that during all those years...the ratio wasn't just picked out of a hat but rather because there is about 15 times more silver in the earth than gold. He is also right about Palladium and Platinum is in the same boat right now. They say that if you took all the gold in the world..it would fill 3 olympic size swimming pools and if you were to do the same with platinum it would only fill the bottom of 1 about as high as your ankles. I think platinum is a great place to be but like a lot of other people on here, it far exceeds my financial capabilities. CHEERS!