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The Markets for Gold and Silver have fundamental differences

There is a difference between Gold and Silver demand - Central Banks don't hoard Silver, so Silver is not so 'fought over' as Gold. Having said that, individuals in Asian world countries do value Silver highly and acquire it when ever that can along with Gold. Also Silver is an industrial metal. It is used in very small quantities in many industrial processes. This means price changes will have very little impact on the volume of industrial usage.

 What I am saying is that the profiles of purchasers for Gold and Silver are not identical and at least in the case of industrial purchasers for Silver they buy for different imperatives than Central Banks do for Gold. So the markets for these two metals should appear different, but surprisingly Silver follows Gold sheepishly in terms of price ratio - about 65:1.

Now the volume of extraction of Gold and Silver from the ground is in the historic ratio of 17:1 and Silver today is more 'used up' than Gold. So you wouldn't expect the price ratio of 65:1. Its' almost like the prices are fixed or manipulated.

 This can't carry on, Silver demand greatly outstrips production, and the production of Silver is not that flexible given that two thirds of the Silver mined is a by-product of the mining of other metals such as copper, zinc and lead, and although more pure Silver mines could be brought into production, it would take an average time span of seven years from conception to working mine. 

 The world strategic stock of silver is almost exhausted, in fact the stock that is claimed to exist is probably paper silver – not much good to industry. So I would suggest people buy physical Silver and keep it. It should outperform Gold.



Disclosure: Long on physical Gold and Silver