Silver Should Outperform Gold

Gold-to-Silver Ratio is simply gold price divided by silver price. After spiking to all-time high at 126.4 on March last year to 126.4 due to the fear of pandemic, it has turned lower considerably.  The average ratio in 300 years history is around 30. The natural ratio in the earth’s crust, according to some mining producers, is around 8 to 1. That means every 1 ounce of Gold mined, there is 8 ounces of silver. If one just simply uses the average ratio of 30 to 1 and apply to the current price gold, that suggests the price of silver should be $1820 (per February 4, 2021) / 30 = $60. Yet, the price of silver today is only $26 which suggests the metal is undervalued.