Silver was once used to make US dimes and quarters until 1964 and half dollars until the year 1970 when the value of silver began to surpass the actual face value of these coins. Silver prices are directly linked to gold prices and in the 20th century, the silver/gold ratio was 1:15. This means that the value of one gold ounce equals 15 silver ounces. We have many more Precious Metals Investing Articles Now Available.
When the availability of gold began to decrease later in the 20th century, the gold/silver ratio reached an astonishing 1:94, meaning 94 silver ounces could be bought at the same price as one gold ounce. Unfortunately, people who decided to invest in silver when the ratio was 1:15 did not make a smart investment because in March 2010, the gold/silver ratio was 1:60. While the price per ounce of gold is currently $1,137, the price per ounce of silver is $17.70.
As interesting as the above ratios may be, they bear no relevance when determining the return on your silver investment. Consider the following. If you purchased one sliver ounce in 2001 when the cost per silver ounce was $4.37 and decided to “cash out” your investment in 2008 when the price per silver ounce was $20, you would have earned a 500% return over the course of seven years.
Those wanting to buy silver wonder what the cause behind the slight decrease in the price of silver between 2008 and 2010. The answer to this is that silver relies greatly on consumer spending as well as industry demand. Because of the US financial crisis, many of the silver markets have seen a small decline in the past two years. This is the opposite for gold, which is an international currency that is used to secure debts and bonds of the government.
The other driving force behind silver’s value is the metal’s use in industry. Since 2001, medical products as well as electrical appliances have increased in their demand for the use of silver. These demands are projected to further rise, which means silver’s base value will increase along with it.
So even though gold usually increases during a recession and silver decreases, the ideal time to buy silver is right now while the economy is slowly beginning to bounce back from its crisis. Once the economic recovery is in full swing, the price of silver will begin to soar and you can enjoy a healthy return on your investment. Another way to keep track of silver values is to watch gold values; when gold prices begin to decline, it means silver prices will grow.
Despite the differences between gold and silver values, it is clear the reasoning behind their individual increases and decreases cause them to work well together. Smart investors will sell their gold investments during their peak value and put their profits directly into silver. Then when silver prices reach their maturity, these investors will take their money out of silver and put it back into gold. We have many more Precious Metals Investing Articles Now Available.