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The Gold to Silver Price Ratio and the Surge in Silver Jewelry Buying Some would say that the gold to silver price ratio is meaningless. Others debate whether it will revert back to historic values maintained at a level mandated by law or policy, or if it will be based on actual above and below ground supply. Above ground investment grade silver is reversed, with five times more gold, while estimates indicate that nine times more silver than gold remains to be mined. Yet where does the actual gold/silver ratio matter the most? Perhaps a look at price discovery at the margin in the jewelry markets would be illuminating since price and perception of value are always at play. Another Look at Price and the Sticker Shock Effect In the mind of the mainstream media, gold is expensive, even though it may be a relative bargain on an inflation adjusted basis or given the questionable value of paper money. Few people would think twice before placing a $5 item in their shopping cart, but almost everyone would question their buying habits at a $10,000 price point. As prices rise higher, consumers and investors tend to seek out alternatives, even if the higher priced item is still a relative bargain. From the perspective of consumption, but not investment, the price of an ounce of gold seems high to most people. Furthermore, as gold prices head higher, jewelers have been moving towards selling lighter pieces with less gold and more silver content in an effort to reduce the “sticker shock” effect on their customers. Gold’s Price Relative to Silver’s Based solely on changes in metals prices, a $100 bracelet bought in the year 2000 would cost more than $600 today. At prices in between those two price points of $100 and $600, plenty of jewelry buyers have had second thoughts about their prospective purchases. To continue to attract shoppers and keep demand at acceptable levels, jewelers typically lower the karat weight of gold and increase the amount of silver in the pieces they offer. For example, a 22k gold band made of gold and silver is just as yellow but is nearly 10% less expensive than a 24k band. To a shopper, the difference between a 22k and 24k ring is typically insignificant, but to silver investors, this difference is huge. …to continue reading the rest of the article, click here.

The Gold to Silver Price Ratio and the Surge in Silver Jewelry Buying  

The retail jewelry marketplace demonstrates that the gold to silver ratio still has some fundamental backing outside of its former legally-d...

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