from Hubert Moolman:
Gold is currently trading at around $1 370 an ounce. I like gold, but for me that is too expensive, even although I think it will increase significantly over the next couple of years.
Why do I think it is too expensive? Because I think there is a way of getting it at the equivalent of $345 an ounce, by buying silver instead.
In January 1980, silver and gold reached all-time high prices (at that time) of $50 and $850 respectively. Therefore, the Gold/Silver ratio at that time was about 17 (850/50).
Silver is currently trading at around $20.30 per ounce. This is about 40.6% (20.3/50) of its 1980 all-time high price. If, I was buying gold at 40.6% of its 1980 high, then I would pay about $345 (850×0.406).
So, if I buy $345 worth of silver [17 ounces (345/20.31)], and hold it until the Gold/Silver ratio reaches the 17-level again; I can exchange it for 1 ounce of gold. I would effectively have paid only $345 for 1 ounce of gold, which today cost $1370.
In my opinion, based on the historical relationship between gold and silver, it is almost guaranteed that the Gold/Silver ratio will again reach the 17- level. Therefore, I believe it is almost guaranteed that this strategy will work. The only question is, how long will it take? Especially since it only was that low more than 30 years ago.
The current state of the Gold/Silver ratio seems to suggest that I might not wait very long.
Below, is a 100-yr chart of the Gold/Silver ratio (from macrotrends.net):
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