Chart of the week: silver is a steal

Gold/silver ratio and the price of silver

This is an excellent time to buy silver, says Wirtschaftswoche’s Frank Doll. It hasn’t been this cheap relative to gold in a quarter of a century. It costs more than 85 ounces of silver to buy an ounce of gold. Whenever the gold-silver ratio (the gold price divided by the silver price) eclipses 80, it tends to herald a rise in the silver price.

Other factors bode well, too. Inflation may be on the way, the US Federal Reserve seems less inclined to knock it on the head, and supplies are set to fall: silver is mined as a byproduct of industrial metals, and with metals prices on the slide, less of it will be produced. Industrial demand is enjoying a long-term upswing – it has risen by 130% since 1999 – as more uses are being found for the white metal.


Viewpoint

“Human beings are not well adapted to stockmarkets… our brains started evolving 300,000 years ago. Stock markets have only been with us for 200 years. Yuval Noah Harari suggests in his book Sapiens that what distinguishes between homo sapiens and our other ancient contemporaries whose evolutionary lines have died out is our enthusiasm for… storytelling. Whether a story is even true is less important than just how compelling it is. Human beings also crave certainty, so we would rather buy into a false narrative than accept that the world is a deeply uncertain and unpredictable place… So we seek out interesting-seeming stories and we can barely wait for the conclusion. It is hardly a surprise that so many investors do less well than they might. Addiction to novelty and an unwillingness or inability to be patient make for uncomfortable behavioural attributes.”

Tim Price, PriceValuePartners

 

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