How Much Is An Ounce Of Silver Worth

Share
How Much Is An Ounce Of Silver Worth - American Eagle, design by Adolph Alexander Wei...

Image via Wikipedia

How much is an ounce of silver worth?  That’s a great question.  I traded silver back in the early 2000s at about $5 an ounce.  In the first quarter of 2011, a decade later, silver is pushing the $40 mark.  That’s eight times as high for the same thing.  Rational and reliable projections from the soundest experts in the silver markets call for prices to go much higher.  I personally see silver blowing past $50 and $75 is all but certain.  Inflation-adjusted figures would require much higher silver prices just to match the 1980 high.  And silver hasn’t appreciated nearly as much in this bull market as it did in the uptrend of the 1970’s.  Buy silver!

How Much Is An Ounce Of Silver Worth?  It Depends On Your Point Of View:

When somebody asks “How much is an ounce of silver worth,” it’s important to frame the discussion.  Compared to what?  See, the problem with identifying a value for something like silver stems from the fact that our reference point is something that itself has no value whatsoever.  In other words, someone in the United States wants to know the value of silver, but they expect is to be expressed in U.S. Dollars.  But dollars are worthless.  They are only as good as someone’s willingness to accept them in exchange for goods and services.

Moreover, the reality is that the buying power of the dollar has been decreasing.  This is true relative to other major national currencies.  This is also true within country, as you simply gauge your ability to buy the things you use to run your household.  Inflation leave you able to do ever less with the same amount of “money.”

This raises the issue of directionality.  We can say that silver is “worth” $40 or $50.  How, then, can it be the case that it was ever “worth” $10.  The fact of the matter is that it’s the same one ounce silver round, for instance.  Maybe the truth of the matter is that the paper currencies have lost some of their appeal.  That being the case, they are less valued, meaning demand has diminished.  We certainly know that the supply has increased dramatically, as the Federal Reserve has been on a spending spree.  So, maybe silver only “appears” to be worth more or less over time based on the fluctuating value of paper money that itself is responsible for all the wiggle room.  Silver seems to be worth more now simply because it can buy more funny money.  This isn’t a new concept, as you’ve always been able to use silver to buy one hundred times as many pennies as dollars.  So, it’s not “how much is an ounce of silver worth,” but rather “how little is your paper worth?”

How Much Is An Ounce Of Silver Worth Based On The Gold:Silver Ratio?

Historically speaking, when someone asks “How much is an ounce of silver worth,” you can answer simply by referencing the price of gold.  Looking back across time, an ounce of gold is usually worth approximately 15 ounces of silver.  Stated differently, the same amount of cash that it would take to buy an ounce of gold could actually buy 15 ounces of silver.

This type of analysis does not determine the inherent value of silver in a vacuum.  Rather, it gives us a glimpse of the current price of silver relative to gold.  When the ratio of gold to silver is higher than 15 or 16, we can say that silver is cheap when compared to gold.  You can buy a lot more silver with an ounce of gold than you “ought” to be able to buy.  The conclusion you can draw is that silver is worth more than is currently being fetched in whatever fiat currency is in play based on where you happen to be on the planet at any given point in time.

The value of this type of analysis is in neutralizing the effects of fiat currencies.  It can be difficult, as you can imagine, to say that an ounce of silver is worth $5 or $50.  That statement alone begs the question as to what a dollar is worth, not “how much is an ounce of silver worth.”  What is a dollar worth?  It’s certainly not worth what it was back ten, twenty, or fifty years ago.  It’s been stated that the dollar has lost 99% of the purchasing power it once possessed.  If that’s true, inflation ought to polish off the last percent, and hammer the final nail in the U.S. Dollar’s coffin.  At any rate, you can see how it’s handy to be able to escape the confines of paper money, which are hard to define, and assess the value of silver apart from that shaky ground.

After about 25 years of being terribly skewed, the gold to silver ratio is rebalancing as silver containment efforts are failing and prices are rising.  The ration has broken through forty, meaning it now takes just forty ounces of silver to buy an ounce of gold.  This hasn’t been true since the mid-1980s.  This points towards silver’s relative strength as it gears up to outperform gold, as it usually does in bull markets.

How Much Is An Ounce Of Silver Worth As A Result Of Industrial Application?

From a completely different vantage point, we can answer the very same question by looking to manufacturing.  Silver has a number of industrial applications, for consumer goods and otherwise.  The value of silver is thus set through a network of buyers and sellers trading the commodity as an ingredient in other applications and products.

How Much Is An Ounce Of Silver Worth In Light Of Geo-Political Unrest And Currency Debasement?

How much is an ounce of silver worth?” is also a question that can be answered through supply and demand.  With the magnitude of uncertainty in the world today, people are fond of real assets.  It’s a quick and easy, if not unsatisfying, answer.  However, silver is “worth” what a willing buyer will pay a willing seller.  To store value in a universally accepted form of real money, people are placing greater value on silver as a source of financial security.  A bullion fund may be fine for profit, but metal in hand provides protection.  So, as you can see, the answer to the question “How much is an ounce of silver worth?” can be addressed from multiple angles, but they all point to exceedingly higher prices from here.How Much Is An Ounce Of Silver Worth