Silver prices may rise to exceed the 10:1 ratio, for the following reasons:
More than all the silver produced by the mines each year is consumed by industry, which leaves little to no room for substantial investment demand. A marginal increase in investment demand will drive prices sky high.
Most silver is produced as a by-product of mining gold, copper, zinc, or lead. Higher silver prices might not substantially increase the amount of silver mined each year. Consider, in 1980, when silver prices went up to $50/oz., less silver was mined compared to 1979!
Higher silver prices may not cause much reduced demand. Why? Because most silver consumed by the industry is used in tiny quantities in each application, such as in film or electrical contacts, therefore, rising silver prices will not easily slow down growing industrial demand.
Additionally, as paper money continues to falter, people will buy silver and gold without regard to price, or they will buy simply because prices are going up. Because many investors today are momentum investors, and won't be able to ignore the gains.
Image: Actress Cameron Diaz, in silver finery, attends the 79th Annual Academy Awards held at the Kodak Theatre on February 25, 2007 in Hollywood, California | Photograph: Frazer Harrison/Getty Images
Also read: From Rs 60,000 to Rs 435 crore!
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