The gold-to-silver price ratio always rose into a recession. Chart 1 presents the gold-to-silver price ratio back to 1915. Since 2011 the ratio has risen except for the crash after the engineered recession of the COVID pandemic. But now again it is on the rise. Is that an indicator that we are headed into a global recession with a crash in the markets like all previous times?
Prior to 1970 the prices of gold and silver were not freely fluctuating. In the US gold was taken off the monetary standard in 1933 but there was still some gold backing the dollar until August 15, 1971 when the ‘gold window’ was closed. Silver was demonetized in 1873. Before that date money was on a bimetallic standard. After that date only gold was still used as money though silver was used in coins.
Chart 2 presents a correlation plot for gold and silver prices. This is a way of determining if two parameters, in this case the prices of the two precious metals, are correlated. If perfectly correlated the dots would fall on a straight line from the origin. This chart show a good but not strong correlation.
Prior to 1873 the gold to silver ratio remained below 20; it was closer to 15. Apparently this is the ratio at which it comes out of the ground. On Chart 2 only those points that are in the light blue region represent a time (after 1915) when the ratio was near 20 (curve (1)) or less. Most of the time it has been above 60 (curve (2)) but less than 80 (curve (3)).
If I may philosophize for a bit. I’d say that the morphological appearance of the plot in Chart 1 before and after 1970 indicates the reality that gold and silver were relegated to become some past ‘barbarous relic’, in the words of John Maynard Keynes. However they have not gone easily into the night. The very fact that the gold to silver price ratio rises into a recession tells us that the market, through human action, favours gold as a safe haven. Also the fact that the ratio is hardly ever less than 20 tells us that the market does not trust in the fiat currency system.
Since 2021 the ratio has been rising again which indicates a crash is coming. Well, you don’t have to be a soothsayer to see that. It is inevitable. It is just a matter of when, not if.
Recommended Reading
- Book: Apocalypse Now: On the Revelation of Jesus Christ
- Book: Merchants of Death: Global Oligarchs and Their War On Humanity
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