Middle East and North African turmoil explodes the price of silver

 Libya crumbles as Colonel Gaddafi’s hardline dictatorship teeters on the brink of destruction.

As the threat of civil war intensifies, insecurity grips the global markets…and silver reaches a 31 year high.

“The mix of Middle Eastern jitters and inflation concerns continues to create a favourable price environment for the precious metals, particularly gold and silver,” James Moore, analyst at TheBullionDesk.com in London, said.

So what you’ve got now is yet another layer of uncertainty underpinning precious metals in 2011.

This is on top of the return of the threat of “double dip recession” in America.

Food inflation is continuing to hammer developing economies… ones that have already been wrecked by four years of Global Financial Crisis.

In a nutshell: there is little room for more ‘crisis’, but that’s exactly what we’ve got unfolding right now in the Arab world.

Investors are scared and fleeing to ‘chaos hedges’ like gold and silver. Now JP has been busted, there’s nothing artificially dampening the price. But how far can silver go? Well, let’s see what the gold/silver ratio is telling us…

For several thousand years the gold price has been fifteen times higher than the silver price on average. This fifteen to one ‘gold-to-silver price ratio’ remained right up to the start of the twentieth Century. Then as Central Banks grew in power, silver lost its importance, dropping to around 70 times less valuable than gold – which is where it has sat for the last few decades.

But this ratio is now dropping fast. Silver’s recent price jump means it is now just 40 times less valuable than gold.

Now here’s the thing: the silver price would still have to triple to more than $90/ounce to get this ratio back to fifteen to one.

Could the recent resurgence in silver carry the asset that high?

Related posts:

1. Gold Reaches Record High Due to Unrest in Middle East
2. Middle East Change Gold Buying Habits
3. Your Silver Stairway to Heaven Awaits
4. Silver making a price boost?
5. Gold or Silver?

Link to this article: : http://www.goldmadesimplenews.com/silver/3120-3120/

Posted by Alex Cowie on Mar 10 2011. Filed under Silver News. You can follow any responses to this entry through the RSS 2.0. Responses are currently closed, but you can trackback from your own site.