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Gold vs. Silver – Absolutely No Comparison

In the five months between March and August this year, the price of silver increased from a fourteen-year low of $11.77 per ounce to a seven-year high of $29.26. That is a whopping gain of one hundred sixty-three percent.

Meanwhile, gold’s price rose from its low of $1472 per ounce to a recent high of $2061. That represents a gain of forty percent, which is certainly a handsome number. Nevertheless, silver’s performance outshone gold by a ratio of four-to-one.

However, five months doesn’t tell the whole story. For those who were and are, hopeful that this is just the beginning of silver’s day in the sun, be warned. Looking at the bigger picture historically, silver can’t hold a candle to gold.

We referred above to silver’s price outperformance relative to gold for the most recent five months. Here is a chart that shows that same performance within the context of the past five years…

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As you can see, when both metals started their five-month run to recent peaks, gold (blue line) was already up eighty percent from its low in 2015. At that time, silver (gold line) was actually lower than it was five years earlier.

For the four years leading up to 2020, gold’s price gains of eighty percent dwarfed silver’s net loss by an infinite number.

Hence, much of silver’s outperformance relative to gold was, in some respects, just a matter of regaining lost ground. The net effect remains that for the five-year period, gold actually outperformed silver. Not by a lot, but it certainly calls into question interpretations and projections for more outperformance by silver going forward.

Gold vs Silver – 10 years; 100 years

One might look at these results and consider that choosing between the two metals is a toss-up. Over a reasonable length of time, maybe it doesn’t make much difference whether you own gold or silver.

So, let’s look at another chart. The one below is also a comparison of gold prices vs. silver prices. This one covers the past ten years…

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Here we see that gold for the ten-year period is up fifty percent. Silver, on the other hand, for the ten-year period, is unchanged.

Comparing current prices for both metals to their peaks in 2011, gold is unchanged and silver is lower by fifty-five percent.

The farther back we go, the worse it looks for silver. The next chart shows gold prices vs. silver prices over the past one hundred years…

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When looking at this chart it is important to focus on the widening gap between gold prices (blue line) and silver prices (gold line); NOT the relative symmetry of their price action. Over time, the gap continues to widen in favor of gold prices.

This widening gap translates to a higher gold-to-silver ratio which can be seen on the chart below…

(source)

“Silver investors who are depending on a declining gold-to-silver ratio are betting that silver will outperform gold going forward. But, if anything, the chart above shows just the opposite. For the past fifty years, the ratio has stayed above a rising trend line taking it…

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