by Peter Schiff, Schiff Gold:
According to the US Mint, demand for American Eagle Silver Coins surged last month. The mint sold 1.65 million ounces of silver in November. That represented a 15% increase over October sales and a whopping 327% increase over November 2017.
Perhaps investors are recognizing the tremendous upside potential for silver. After all, the silver-gold ratio hit a quarter-century high last month. That signals the price of silver is out of whack.
But there are even more fundamental reasons to own silver in our updated report “The Powerful Case for Silver.“
The silver-gold ratio hit 86:1 in November and continues to hover in that neighborhood. To find a higher silver-gold ratio, you have to go all the way back to 1991.
Historically, the silver-gold ratio has been much lower. Geologists estimate that there are approximately 19 ounces of silver for every ounce of gold in the earth’s crust, with a ratio of approximately 11.2 ounces of silver to each ounce of gold that has ever been mined. In 1792, the gold/silver price ratio was fixed by law in the United States at 15:1. France mandated a ratio of 15.5:1 in 1803. Faced with the challenges of a bi-metallic monetary system with fixed exchange rates and the aftermath of a worldwide financial crisis, the US Congress passed the Coinage Act of 1873. Following the lead of other Western nations, including England, Portugal, Canada, and Germany, this act formally demonetized silver and established a gold standard for the United States. With silver playing a smaller role as a monetary metal, the silver-gold ratio gradually spread. The modern average over the last century is around 40:1.
The bottom line is that the current ratio signals that silver remains significantly undervalued.
And there are other important reasons to consider adding silver to your investment portfolio. We cover them in “The Powerful Case for Silver.”
Silver is much more volatile than gold due to its industrial role, but at its core, it is still a monetary metal and it tends to track relatively consistently with gold over time. When gold goes up, it almost always takes silver with it. When this dollar strength fades and inflation rears its ugly head, both metals will likely take off. At that point, history indicates silver will begin to close that gap with gold.
Silver tends to get lost in gold’s shadow, but it is also a valuable metal that serves important functions in your investment portfolio.
In simplest terms, silver is the everyman’s gold. The white metal is not only money, it’s also an important industrial metal used in electronics, medicine and the “green energy” sector. Demand for silver in industry and technology is expected to increase in the coming years.