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Today a gold bug told me silver was undervalued because it comes out of the ground at a ratio of 15/1 with gold.

Based on his logic silver should be close to $300 per oz.

This is like saying that some shitcoin should be priced at it's issuance ratio with Bitcoin regardless of the premine.

I told him to look at the market cap, which was at a ratio of about 4/1.

Which means silver is terribly overvalued and in order to maintain the current ratio, gold would need to 3X with silver staying the same price.

Obviously the same logic applies to bitcoin vs gold, but this guy could not follow what I was saying on the first step.

Nothing makes me more bullish than talking with someone like this.

Tommy "The Purchase" 2mo ago

Well, there is a bit more to the price of silver (and gold) than there is to bitcoin and lesser cryptocurrencies. Silver especially is an actual resource in industrial production, used in all kinds of electronics, including electric cars and solar panels.

The historical 15/1 ratio applied in a time when silver was pretty much only decorative, used for cutlery, mirrors, and jewelry and I believe it was more of a function of society and of specie-backed currencies.

Now that large industries can't go without it, different factors need to be considered, I think.

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Discussion

Sourcenode 2mo ago

In order to consider this I'd like to know percentage of extracted silver is currently used for industrial applications and what percentage of newly mined silver is used for industrial applications.

Tommy "The Purchase" 2mo ago

As did I so I dug around a little and found the following Forbes article according to which industrial application made up about 56% of demand in 2021, I guess the percentage still serves as a ballpark number:

https://www.forbes.com/sites/greatspeculations/2019/10/25/silver-prices-10-year-price-analysis-and-production-demand-gdp-dynamics/

Sourcenode 2mo ago

Interesting. Similar to bitcoin in that sense, the price will tend to react the strongest to what the whales do.

My guess is that most people holding silver are holding it for a trade rather than some kind of end game, but who knows.

More power to them I suppose. I have enough to pay for groceries during an extended power outage, but naturally I expect Bitcoin to outperform both gold and silver in the long run.

Tommy "The Purchase" 2mo ago

Haha, I agree, the whales might be different people in that sector but money and more specifically demand naturally shapes prices there as well.

Yeah, I think at least most private people hold silver as jewelry, cutlery, or as an investment.

I also have a little to weather a storm of the lights-out kind but with the sales tax imposed on it, I won't go buying large quantities any time soon 😄