Below is an abridged version of an article by Simon Black of SovereignMan.com about why the price of silver could skyrocket.
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Why do recessions, and extreme turmoil, often lead to a massive spike in the gold/silver ratio?
Or, asked differently, why does gold often go up, and silver stays flat (or falls) during such occasions?
Gold is still widely used as a reserve currency by central banks and governments around the world and investors still buy gold as a hedge against inflation and uncertainty.
Silver, on the other hand, while also a hedge against inflation and uncertainty, has countless industrial applications so silver’s demand fundamentals are more heavily influenced by overall economic health.
If the economy is in recession, silver prices can fall because there is less demand from industry.
A History of Spikes in the Gold/Silver Ratio
- Just prior to World War II as Hitler launched his invasion of Poland, the ratio spiked to 98:1.
- In 1991 as the first Gulf War began, the ratio again reached 100:1.
- Today we are back again in that territory; as of this morning, the ratio is 112:1, and it’s been as high as 120 or more in recent weeks.
The Effect of Massive Dollar Creation
Given the current COVID-19 crisis and the effect it is having on the world’s economy, central banks around the world are beginning to print an extraordinary amount of money and cause governments to go into a ridiculous amount of debt.
The Federal Reserve in the U.S., for example, his already expanded its balance sheet by US$6 trillion, nearly a 50% increase from last month, and they are just getting started.
…to continue reading the full post of this abridged article, visit munKNEE.com
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CHART 1: Gold-Silver Ratio – October 2019 to April 2020
