If the true price of Au is ~$84K, then what would Ag be? (house, oil)

[sunbelt57]

Some people like Bill Holter and Lynette Zang have calculated the true price of Gold to be around $87K by dividing the M2 money supply (total amount of dollars in circulation) by the total amount of Gold (oz) in existence. Supposedly, this would be the price of Gold if we were to go back to a Gold standard. But if that were to happen, what would be the price of Ag? (Silver). Would it be calculated by the Gold/Siver ratio of the 18th & 19th century which I think was 10:1. Correct me if I'm wrong about that.

[terracore]

The problem with those numbers is that we're never going back to a "gold standard". Even when we were on the "gold standard" it became fractional after the federal reserve was established. We may return to a monetary system where currency is backed by assets and gold may be one of the assets in the basket, but trying to predict what the price of gold is going to be in a monetary system that hasn't been invented yet is just pure speculation. The other thing to consider is the value of the currency. If inflation causes a loaf of bread to be $10, then the price of gold will go up commensurately. This is more a function of the depreciating value of the currency. That is why people buy PMs as an inflation hedge.

As far as your question, I have heard repeatedly the traditional ratio was that gold costs 15 times as much as silver, but one must understand that the "price" of a precious metal is determined in a fake futures market. That is why the "spot" price of silver is about $15 but you can't actually buy it for less than $20.

The other reason why the silver/gold ratio may never return to it's 15:1 is because the nature of the commodities. Most of the gold ever mined still exists. Something like 98% of it, even the stuff mined thousands of years ago. Almost all the silver that has been mined has been consumed because it's an industrial commodity. The price of gold is based on it's rarity and perceived value. The price of silver is more correlated to what it costs to pull it out of the ground, however if people perceive it's value as being higher than that the market will set the price. It's traded for over $50/ounce before (much higher when adjusted for inflation) so there is no reason to believe it can't go over $100/ounce.

[illtaketwoplease]

Things would have to get pretty bad for people to pay 4k for gold and $80 for silver... and even then -- who is going to buy it and what does it get you? Politicians will not give up fiat currencies unless forced to because they can't give stuff away and send out checks. The people promoting gold and silver (and bitcoin) have it and want it to go up.

[terracore]

A week ago most people wouldn't have believed a barrel of oil cost -$40/barrel. But it did. I don't think 4k for gold or $80 for silver is out of the question. Silver sold for nearly $120/ounce (adjusted for inflation) in 1980. I remember that was when a lot of households sold their inherited silverware and bought "flatware". Now silverware is nearly impossible to find.

[sholomar]

These types of articles have been around forever. I suggest ignoring them. Only the rich buy gold, and millennials don't care about them seeing them as outdated relics. I buy platinum because it actually has industrial use and it's relatively under-priced compared to palladium and rhodium.



That said it's smart to have hard assets and be invested in gold miners because the people who run the fed and government could end up destroying the US dollar in their attempts to inflate.

[terracore]

“Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.”

― Norm Franz