Investors see silver lining in economic gloom

Silver prices have risen 31pc in 2010 to a 30-year high, outperforming gold, equities and most base metals. On Tuesday, the gold-silver ratio dropped below 60 for the first time in 11 months.

The gold-silver ratio is simply the number of ounces of silver it takes to buy one ounce of gold. The silver price is currently $22.11 and the gold price is $1,317, so the silver ratio now stands at 59.6.

The ratio varies wildly. In 1970, it was about 20 and it peaked at just under 100 in 1991. The average is around about 40 – and that is the key to any silver bull’s argument. Historically, it appears that silver is undervalued in relation to gold, they argue.

In 2010, the ratio has been as high as 72, recorded in February, and is now just below 60. Many believe it could have further to fall.

The reasons for gold’s outperformance are well documented – inflationary fears, currency woes and safe-haven demand – but does the declining ratio towards its average mean that silver is going to continue with its charge forward?

Continue www.telegraph.co.uk/finance/markets/8039595/Investors-see-silver-lining-in-economic-gloom.html