Why Silver Can Make You Rich

For every ounce of gold that exists in the earth’s crust there is roughly 15 ounces of silver. For many centuries this relationship was borne out in the prices of the two metals. An ounce of gold would generally trade at roughly 15 times what an ounce of silver would cost. If gold was $150.00 an ounce then silver would go for $10.00 an ounce.

Gold and silver have long been used as inflation hedges. When inflation occurs and paper money loses value people have traditionally bought gold and silver as hedges against that loss of value in paper currency. Many countries have also historically put gold and silver in their coinage.

(Ancient Roman silver coin)

The United States did this, putting silver in everyday coins, until 1964. Today coins minted prior to 1965 in the United States are worth much more than their face value. Such coins are collected today in large part for their silver content.

(1883 Morgan Silver Dollar)

Traditionally, silver has been considered the “poor man’s gold”. If you had plenty of money and wanted an inflation hedge you purchased gold. If you did not have a lot of money and wanted an inflation hedge you purchased silver. But today this may very well have been done to a great excess.

Today, gold sells for roughly $900.00 per ounce. Silver can be bought for roughly $12.50 per ounce. So gold is selling for roughly 72 times what silver is. That is you can purchase 72 ounces of silver for what one ounce of gold costs you.

Image via Wikipedia

Image via Wikipedia

As we have seen during the economic downturn, people have been trading down with their money. Instead of shopping at fancy stores people have been going to Wal-Mart which has actually seen an increase in their sales while most retailers have seen declines. The same has been true with McDonald’s which has seen increased sales while more upscale restaurants have seen lower sales. This phenomena has not yet been seen in the relationship between gold and silver but if it does happen it could make anyone investing in silver rich.

The earth’s crust still contains roughly 15 ounces of silver for one ounce of gold. But today gold sells for 72 times what silver sells for.

Today central banks and other money producing government entities around the world are printing money at record paces. Eventually this is likely to produce inflation on a global basis as the world’s money supplies are being inflated.

(Actual Ten Trillion Dollar Bill)

When the inflation pressures hit, it is likely people will turn to gold and silver to hedge their money which will cause higher prices for the two precious metals. With inflation pressures it is not hard to see gold prices rising to $1,500.00 per ounce. At a price of 72 times that would translate to a price of roughly $21.00 per ounce for silver.

If the prices of gold and silver ever go back to historical norms based upon the existence of the two metals in the earth’s crust, silver could move to a much higher price. With gold at $1,500.00 an ounce if silver ever went back to trading at 15 times what gold is, silver would rise to $100.00 per ounce. An 800% increase from the current price of $12.50. Even a more modest move back to historical norms of say 50 times would lead to a silver price of $30.00 per ounce. That would be a 240% gain in silver from current prices. Gains of 240% to 800% in your investments will make you rich.

There is absolutely no guarantee that any of the things discussed in this article will happen. Gold and silver ratios could remain at 72 times or even go higher. Inflation might not occur and gold and silver could drop in value. Trading down from gold to silver might never occur. But the earth’s crust still contains roughly 15 ounces of silver for each ounce of gold, and if the things discussed in this article do occur, silver can and will make you rich if you own enough of it.