High GSR v Maths & History – Which will win?

In researching yesterday’s article on the amount of gold bought and produced in Q1 of this year we found the following comparing that gold with silver in the same period as we sit here with a gold silver ratio of 84.5.  Keeping in mind that ratio says it takes 84.5oz of silver to buy just 1oz of gold lets first look at how much of each was bought by weight and value in that period for investment:

Gold vs Silver

So investment (public and central bank) demand was roughly similar by weight.  How about production year to date?

Global Gold

Around 8 times more silver was mined than gold by weight yet 1/10 by value.

Remembering too that around half of all that silver mined is used in industry in products that are largely disposed of without recovering the metal, and it adds to that supply / demand / price anomaly against the yellow metal.

So ask yourself how any of the above correlates with an 84.5:1 ratio?

One thing is for sure, never in the past has the Gold Silver Ratio stayed at such lofty heights as it is right now for very long at all.  Maths alone, via mean reversion, says it can’t. 

GSR Maloney