Is silver underpriced compared to gold? Let’s take a look at the facts. Silver currently is $17.28 a troy ounce and gold currently is $1225.66 a troy ounce, meaning the gold: silver price ratio is 71:1. Of course these are spot prices, which don’t match up with actual physical prices, so let’s take a look at the prices of real gold and silver, not paper gold and silver.
This morning, the lowest price of a 10-oz gold bar I could find on one dealer’s site per 1-oz of gold was $1,251.29. For silver, the lowest price of a 10-oz silver bar per 1-oz of silver was $18.16. This ratio of gold: silver price still is an enormous 69:1, meaning that you can choose to either buy 10 troy ounces of gold, or for the same dollar amount, purchase 690 ounces of silver.
Some people state that Central Bankers don’t care about the price of silver and they only care about controlling the price of gold, but this statement is just flat out wrong, in my opinion. If Central Bankers didn’t care so much about controlling the price of silver, then they wouldn’t flood the market with boatloads of silvers futures contracts to suppress the price of silver as they do with gold, during the periods they create rapid declines in the prices of these two precious metals. Since we know the mechanisms by which they create these waterfall declines in paper markets (as I’ve discussed these mechanisms extensively in the past and provided documented proof with Nanex provided data), there is no argument that Central Bankers are concerned with controlling the price of silver as well as the price of gold.
Most people look at the paper price of silver and if it is falling, they mistakenly believe that physical silver is not a good buy because a falling price means too much supply and not enough demand. The supply and demand assumption is true, but only true of the paper market where hundreds more paper silver weight is traded than actually physically exists. So then people turn to physical silver prices, and if physical silver prices are falling, they assume this also means too much physical supply and not enough demand, and conclude that physical silver is not a good buy either. However, physical silver prices only fall when paper silver prices are raided by bankers, because bankers have set up a false system that ties physical prices to paper prices that works spectacularly well for them for now. However, there will come a time when physical silver prices actually reflect what is happening with physical supply of silver and physical demand of silver versus the supply and demand determinants of paper silver markets.