Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Sticker Shock and Silver Surge

Commodities / Gold and Silver 2010 Nov 24, 2010 - 01:05 PM GMT

By: Dr_Jeff_Lewis

Commodities

Price is an interesting element of the marketplace.  At one price, a product may be a perceived bargain, yet at another still similar price, the same product would be a perceived rip-off.  As you walk through a supermarket, it becomes evident the tricks that certain prices can play on your mind.  $1.99 looks far less expensive than $2, even if the difference is only one cent.  Ten for $10 deals are more likely to drive more sales volume, even if the normal market price is actually $1 each. 


However, beyond price psychology, we also have the sticker shock effect.  While few of us would think twice before placing a $5 item in our cart, most everyone would second guess their buying habits at a $10,000 price point.  As prices rise higher, we seek out alternatives, even if the higher price is still a relative bargain. 

Gold’s Relativity to Silver

From the perspective of consumption, but not investment, gold seems to have hit its upper bound.  An article in the Wall Street Journal found that as gold prices head higher, jewelers are moving towards lighter pieces with less gold and more silver content in an effort to reduce the effects of sticker shock on their customers.  Based on pure and simple changes in metals prices, a $100 bracelet in the year 2000 would cost more than $500 today.  At prices in between those two price points of $100 and $500, there are plenty of buyers having second thoughts. 

To continue to attract shoppers, jewelers are lowering the karat weight of gold and increasing the amount of silver.  A 22k gold band made of gold and silver is just as yellow, but nearly 10% less expensive than a 24k band.  To a shopper, the difference between 22k and 24k is insignificant, but to silver investors, it's huge.

Confirming the Gold to Silver Ratio

After the fall of bimetallism and the general decline in commodity backed currencies, the gold and silver ratio shed some of its stability.  The highs and lows which were previously held in place by law rose higher and lower.  Recently, the ratio peaked at near record highs as gold moved into uncharted territory.

However, the new jewelry marketplace is showing that the gold to silver ratio does still have some fundamental backing.   When gold runs too high, the obvious solution for jewelers is to add more silver and reduce the per-item price and resulting sticker shock.  The justification for the gold to silver ratio, outside of previously legally defined levels, is evident in jewelry.

As the market for gold in jewelry has cooled since 2005, silver is quickly taking its place.  Should the economy rebound fully to its 2007 boom levels, consumer jewelry purchases will only aid in helping silver fill the ratio gap between the sky-high price of gold.  Plus, with silver production routinely running under the level of gold production, any change in preference from gold to silver is multiplied by the differences in available metal stock and production supplies.

With the tide turning in jewelry, silver investors may be best to root not just for higher silver prices, but higher gold prices.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in