Issue link: https://maltatoday.uberflip.com/i/1220547
12.03.2020 14 TRADING EARLIER in the week, gold price stood at $1,666/oz and silver at $16.66/oz. In other words an ounce of gold is 100 times the price of an ounce of sil- ver. Or, to use the correct terminology, the gold-silver ratio has gone above 100 – which is almost unheard of. The gold-silver ratio has only ever gone above 100 once before. It didn't happen in the financial crisis of 2008, the dotcom crash of 2000, or the Long Term Capital Management Fund Cri- sis of 1998. It happened in 1991. Silver was $3.50/oz at the time and gold was, of course, $350. (Actual- ly, it was closer to $370 and the ratio touched 105). Apart from 1991 the ratio has never been as high as it was on Monday. Not once in history. It's one of the extraor- dinary extremes that the coronavirus panic has caused. The obvious trade here is to sell gold and buy silver. But on the basis of ratios alone, you should also be sell- ing gold and buying oil, base metals, stocks, just about anything. To be clear, now is not the time to be selling gold, particularly with all the fiscal stimulus that's coming. A gold-silver ratio of 15 is but a distant memory e gold-silver ratio is an odd one. Really, it should be somewhere around 15. Silver is only 15 times as abundant as gold – there is about 15 times more silver in the earth's crust as there is gold. And, historically, the relative price of the two ranged between around 15 and 20. Until 1875 the USA was a bi-me- tallic standard – both silver and gold were money, in other words – and the exchange rate between the two metals was 15, more or less. However, in the 20th century, as we all know, countries abandoned their ties to gold and silver and so money and met- al went their separate ways. at ratio of 15 has become an ever-more distant memory. It did hit 15 briefly in 1981 as the Hunt Brothers tried to corner the silver mar- ket. But this was an extraordinary situa- tion. It wasn't typical. e typical broad- er trend is that silver is losing its value relative to gold. One day we will get back to 15, say the most diehard silver bugs. But others are not so convinced today. In fact, you could go one stage further. e gold-silver ratio should be lower than 15. Silver gets used, gold does not – all the gold that has ever been mined, pretty much, still exists somewhere. But silver, with its numerous industrial applications, gets consumed. e ratio between the two should be closer to ten. And yet here we are with that ratio ten times higher – and silver ten times too cheap. e sad fact for silver bugs is that since silver no longer has any official monetary use, its relative value has plummeted. Some blame shenanigans on futures exchanges for the low price of silver – others blame the evolution of money. Is the world going to go back to some sort of metallic standard as a result of coronavirus? Money is getting more and more digital; metal is too physical. But I can see one scenario where it might. Get ready for epic debasement e authorities' reaction to the cri- sis will be to debase currency: slashing rates (we got a dose of that from the Bank of England just this morning), bailouts, money printing (which will be given some new name that is even more obfuscatory than quantitative easing), infrastructure spending. Gold bugs have long been waiting for that loss-of-faith moment when faith in fiat money will be lost. Many investors own and love silver. I love silver and they will not think it's a bad thing to be holding silver in this time of crisis. If it wasn't so "precious" it would have been dragged down a lot more – like energy and base metals. It's certainly cheap. But so are a lot of other things at the moment. e gold-silver ratio hit a low at 30 in 2011 when silver touched $50. It has been in an uptrend ever since. Plenty of investors have tried to call the top in the ratio and it has kept grinding higher. e likelihood is that it will pull back a little from the extremes, perhaps even as far as the 80s. But the reality of this modern fiat age is that, as far as the gold-silver ratio is concerned, it will take a fairly extreme change in circum- stances for us even to get back to 50. 50 is the new 15. Sell gold and buy silver as a trade, by all means, but make sure you reverse the trade – or at least start moving up the stops if we ever get back to the 80s, 70s or 60s. Silver has almost never been this cheap – but should you buy? Silver's value has plummeted since it stopped officially being money