Spot silver reached a new nominal record high of $39.7625 an ounce on Wednesday, before settling at $39.525 an ounce on Thursday morning.
This represents a 4.94% gain from last week’s levels and 9.7% increase on the month. The expectation that the Fed will maintain an easy monetary policy and that Japan will have to rebuild has helped silver outperform gold over the past month. Gold currently trades at 36.7 times the price of silver, the lowest ratio since 1983. However, Deutsche Bank have noted that silver is around 18.75 times more abundant in the earth's crust than gold. This could suggest the current price ratio is still too high. Silver has more industrial uses than gold and industrial demand for the metal has been increasing.
As our in-house report on silver noted, the metal is increasingly being used in the solar energy and medical industries. It can also be used as a replacement for lithium batteries in laptops. Assuming the gold-to-silver ratio had to fall to 18.75 times, the price of silver could surpass $77 an ounce, based on gold at current levels. In our in-house silver report, we provide a more conservative estimate of 26.9 times, the long-term historical ratio. If the gold-to-silver ratio had to recalibrate back to its long term average, then silver could reach $54.3 an ounce. What’s also interesting is the fact that silver is still below its real high. In 1980, silver reached $49.45 an ounce, which would be equivalent to $99 in today’s prices.