Gold and silver are two precious metals, which, although included in the same category, differ significantly from one another.
What unites them is the fact that these two metals are used largely as insurance against crises and inflation. Both threats are apparent at this time.
On the one hand there are real concerns among investors about an eventual secondary cycle of the crisis, as this time the danger comes not from the U.S. but from the Old continent and from countries like Greece, Spain and Portugal.
However, gold and silver have some certain differences. Gold is much more preferred instrument for insurance by investors, while silver is traded in a greater extent, similar to other metals. Another important difference is that in a historical plan, silver has proven to be much more volatile material than gold.
And yet, in a long-term aspect, the relationship between these two metals is essential. Relation between their prices is found in the so-called ration “Gold / Silver Ratio”. Based on it, they often try to anticipate future movements in the prices of the two metals, especially at times when this ratio varies considerably from their average values.
Historically, or for a longer period of decades, the ratio between the prices of gold and silver is at a level of 5.13, or gold was on average 5.13 times more expensive than silver per ounce. This ratio is not accidental. Studies in nature suggest that this is precisely the ratio in which silver is more common than gold.
The financial crisis and the prospects for recession led to a strong distortion of this ratio in recent times. Gold is about to test its historical maximum at levels of more than 1200 dollars an ounce. At the same time silver is on about half of the way to his record. Silver is lagging considerably behind its rise. Currently, the ratio between the prices of gold and silver amounted to significant 65, which is a serious imbalance, according to some experts. That makes a lot of them be very positive about the future performance of silver, which often tends to be catching tool.
And if the forecasts of specialists for further appreciation of gold to new records, in terms of the threat of serious inflation, come true, and if we see a decrease in the ratio between the prices of the two metals to closer average values, then the silver might be a better choice.