ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Gold and Silver -The gold Silver ratio, uses of gold and silver and their abundance in the earth

Updated on April 3, 2012

Gold and Silver

Gold is the first and most obvious choice for many investors who are looking to precious metals as a safe haven and effective hedge against fiat currency devaluation and economic uncertainty. However as I write this hub the price of gold is approaching $1700 per ounce which is threatening to price out the average investor who is worried about inflation and looking for exposure to precious metals and hard assets. Silver is perhaps the next most obvious choice. Silver is both an industrial and precious metal. Like gold, silver has thousands of years history as sound money and a store of value, however unlike gold over 50% of silver produced is currently used in industry.

The Uses of Gold and silver

Let’s take a closer look at the uses of gold and silver.

The chart above breaks down the uses of gold. Over half of the demand for gold is for jewellery (54%). Investment use is 35% of the demand for gold. A very small proportion of demand for gold comes from industrial use and dentistry.


Over half the silver produced is used in industry and photography. Jewellery makes up 16% and Investment demand (including coins and medals) makes up 27% of demand.

It is clear from the above chart that silver has two faces. Historically Silver was and still is a precious metal used in coinage alongside gold, however over the past century industrial demand for silver has become increasingly important.

Gold and Silver prices

The chart above shows the price of silver has followed the price of gold reasonably closely over the past 30 years. This suggests that silver is primarily priced as a precious metal like gold rather than an industrial metal. It is notable however that the price of silver is much more prone to short term volatility than gold. During the financial crisis of 2008 the price of silver fell from $20 to $9, a drop of 55% in the space of 6 months between March and November. Over the same period gold fell 21%. It is this volatility that gets silver named “the devils metal” as these short term spikes and drops in price make it difficult to trade. Part of the reason for the volatility is due to the small market for silver. In relative terms the market for silver is approximately 18 times smaller than that of gold. The price stability of gold v silver also reflects the status of gold as the number 1 precious metal for investment.

This price relationship between gold and silver is known as the gold/silver ratio. Currently the gold/silver ratio is 54:1 which means that the price of gold is 54 times the price of silver. Historically the gold silver ratio has been as low as 10:1 in the early part of the 20th century and as high 94:1 in the 1990. The following chart shows the gold/silver ratio over the past 30 years

So what does it mean? And what should the gold silver ratio be?

This is an impossible question to answer. If we are just looking at a 30 year time frame the current gold/silver ratio of 54:1 is below the average of 64:1, which might indicate that silver is slightly overvalued compared to gold. However this comparison to average is far too simplistic to gain an understanding of what the ratio should be. During the 30 year time period the gold silver ratio hit a low of 34:1 in 2005 and in 1983. In 1980 the gold silver ratio was as low as 17:1.

One way of trying to gage what the gold/silver ratio should be is if we look at abundance of both gold and silver in the earth’s crust. The abundance of gold in the earth’s crust is quoted in various reports as 4 parts per billion (by weight). The abundance of silver in the earth’s crust is 75 parts per billion. This gives a ratio of 19:1 (i.e. silver is 19 times more abundant than gold). Some Analysts use this point to make the bullish case for silver and argue that in the long term the price of silver must move closer toward gold in order to move to a level which reflects the abundance in the earth. There is much merit to this argument however the problem with it is that it only looks at half of the equation (i.e. the supply side) and ignores the demand factors. If precious metals were priced wholly on their scarcity in the ground then Rhodium and Iridium which are the rarest of all the precious metals would be worth four times as much as gold. It is difficult to predict where the price of silver is going over the short term. Over the longer term as debt continues to weigh heavy on the world economy and negative real interest rates remain the order of the day, silver remains a very attractive investment.

The silver market

The silver market is much smaller than the gold market. It is estimated that there is approximately 1 billion troy ounces of investment grade silver compared to 2 billion troy ounces of gold. Because of the relative small size of the silver market it is much more volitile than that of gold. A single large buyer can influence the silver market, this was evidenced in the 80s when the Hunt Brothers infamously attempted to corner the silver market and nearly did so. Today the price of silver is impacted significantly by the paper market (futures and ETFs). In this interview John Embry and James Turk discuss the silver market and where it is headed.

John Embry and James Turk discuss the silver market


Submit a Comment
  • Theeyeballkid profile imageAUTHOR


    8 years ago

    Thanks, likewise I love silver but its a white knuckle ride.

    You are the first person to get the Waits connection! I love Tom Waits, great Dinner Party Music :-)

  • marriedwithdebt profile image


    8 years ago from Illinois

    Great hub. I'm a big fan of silver. Is your name a reference to Tom Waits?


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)