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While gold has earned all of the good news, it is important to spend a few moments focusing on the importance of silver in the precious metals markets.

February 14, 2012 – While gold has earned all of the good news, it is important to spend a few moments focusing on the importance of silver in the precious metals markets. Silver, historically known as “poor man’s gold,” receives much less attention as the gold is more expensive per ounce and even considered by some to be prettier, if that makes a financial difference. However, the capacities of silver make it a very interesting metal that fulfills roles gold is unable to.

Silver is both a monetary and an industrial metal. It’s use in the West as a medium of exchange is as American as we get. Silver dollars, silver coins, and silver mines are partially what made this country in the 1800’s. It is a proud part of our heritage that most Americans seem to have forgotten.

And that, it turns out, does make a financial difference. During the industrial revolution, we discovered how vitally central a role silver plays in technology and energy services. In present day, silver is a vital component in cars, cell phones, and even solar paneling. That silver is never coming back to market and creates a quantifiable added scarcity that is simply not in effect in the gold market.

This is certainly one of the considerations Citigroup took into account recently when it issued a report to its clientele stating that silver appears underpriced relative to gold and therefore has the capacity to outperform in the short-term. This report cites the historical gold to silver ratio, which has been far extended for a few year years now. But the technicals do indicate that gold has received a lot more attention in the safe-haven asset buying, thus creating an undervaluation in silver.

The gold silver ratio is a historical index for the number of ounces of silver it takes to buy one ounce of gold. Historically, meaning as far back as ancient Greece and ancient Rome, that ratio was between 8 and 16 ounces of silver for every ounce of gold. The ratio now stands at 51 ounces of silver for every ounce of gold, indicating that silver is very undervalued in the current market and a great buy.

Shannon King

Senior Staff Writer – GoldSilver.org

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