Silver has risen by around 28% in one month (measured in euros) and is experiencing an unprecedented surge. The sharp rise in the price of silver has likely surprised many investors and was predicted by only a few. Although silver has many industrial properties and is often viewed as a commodity, the current rise in the silver price is due to the extremely high demand for silver as an investment. Investors are seeking relatively safe investments in economically uncertain times, and silver is gaining popularity over gold.
 

Gold vs silver

While news mainly reports on the rise in the gold price (measured in dollars rather than euros), silver rarely makes headlines. Nevertheless, silver has experienced a much stronger period, and the silver-to-gold ratio has now dropped to 1 to 32. This means that with 1 kilogram of gold, you can buy 32 kilograms of silver. Historically, this ratio was 1 to 16, based on the estimated global availability of gold and silver in the earth's crust. In recent years, however, this ratio has been much higher, which makes silver undervalued and gold overvalued. The ratio is expected to decrease further, as there is far more demand for silver than what is available to meet that demand.
 
Demand for silver mainly comes from the investment market. The U.S. Mint, one of the largest mints in the world producing both gold and silver coins, has sold more than 13 million troy ounces of silver this year. In the same period, 370,000 troy ounces of gold were sold. With a silver price of $46 per troy ounce and a gold price of $1,500, the revenue from silver coins is comparable to that from gold coins, whereas usually, much more gold is traded than silver. Large dealers worldwide, such as Sprott Money and Goldmoney, also report that more silver is being sold than gold.
 

Gold-Silver Ratio Outlook

While it was previously estimated that there was about 16 to 17 times more silver than gold in the earth, last year showed a different reality. According to published figures, approximately 736 million troy ounces of silver and 85 million troy ounces of gold were mined in 2010. Additionally, 215 million troy ounces of silver and 53 million troy ounces of gold were recovered through recycling. Altogether, 951 million troy ounces of silver and 139 million troy ounces of gold were obtained. Calculating the ratio results in a ratio of 1 to 9.
 
According to data from the U.S. Geological Survey, the ratio of global gold and silver reserves is comparable at 1 to 10. Considering that silver is widely used in industry, it seems only a matter of time before silver returns to the historical ratio of 1 to 16—and perhaps increases further in value relative to gold.
 
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Disclaimer: The Silver Mountain does not provide investment advice, and this article should not be considered as such. Past performance does not guarantee future results.