There is a lot of talk on the web about silver being significantly undervalued versus gold, writes Miguel Perez-Santalla at BullionVault in New York. The ratio of gold to silver prices, in other words, is set to fall.
By Miguel Perez-Santalla
BullionVault
Many commentators and analysts online like to point to this historical relationship between gold and silver. People even comment on the gold/silver ratio as far back as thousands of years ago. Silver was likely much closer in value to gold than it is today, perhaps at a ratio of 3:1 in medieval Japan and 2:1 in ancient Egypt, thanks to the lack of domestic silver mines in those kingdoms.
In fact, silver may have been more valuable than gold for long stretches of history, and not only in those places where supply was scarce. Because people could source greater amounts of silver, they learnt how to make more useful objects from it. Both silver and gold have long been used abundantly for ornamentation and as a thing of beauty in homes, temples and palaces. As jewelry their beauty was very much esteemed.
However, once gold was found in increasing abundance and man’s metallurgical skills improved, gold soon overtook silver as the more highly prized metal. One of the main reasons is gold’s ability to be beaten and stretched to great lengths while still maintaining its beauty. But the most important of its properties is that it does not tarnish. In a thing of art and beauty this is an important factor, and one that still to this day maintains gold’s lead over silver for value in the jewelry industry.