THE OIL-SILVER RATIO

During the time of the three big raw material booms of the last century, the oil price was always sky-rocketing before the other raw material subclasses, especially in comparison to precious metals.

So have a look at the relationship between oil and silver.
It’s interesting to see that the oil price has already been more than 300 percent above its ATH of 40 USD (US Dollars) a barrel, marked in 1980/81.
So it’s absolutely unbelievable that silver, which has the highest intrinsic value, is one of the most undervalued assets at all, and still quoting remarkable 70 percent below its high dating from 1980 (52,5 USD).
For the anticyclic orientated investor, being aimed at substance, the sheer enormity of this undervaluation is reason enough to have a more precise look at the white metal.

On significant turning points one could always buy one barrel of oil with one or two silver ounces. You could again discover this development during the final stage of the last big raw material boom from 1968/70 to 1980/82. During this period of time, the oil price increased about 1.900 percent from 2 to 40 USD.
The increase of the silver price was even stronger in those days.
With an increase of the silver price from 1,30 USD up to 52,50 USD, the white metal increased almost 4.000 percent in value. However, these movements didn’t go linear.
While the oil price increased in advance, silver still stayed far behind the oil for quite a long time.
But with the end of the year 1978, silver caught up and even surpassed the oil price in the end.
One can really say that the price for silver rocked the sky during the final stage of the rough inflationary times of the 70’s.
At the end of this enormous upward trend, less than 0.80 silver ounces were enough to buy one barrel of oil.
So the oil/silver ratio was around 1!

What does an oil/silver ratio of 1 signify for the approximate future?
Currently one has to spend 7 silver ounces to buy one barrel of oil.
So what can we expect for the future? Proceeding on the assumption that the oil price will rise over 150 USD in the coming decade, we arrive at a silver price of more than 150 USD either, expected the oil/silver ratio to be 1.

Also read about: Gold-Silver Ratio , Dow-Silver Ratio , Dow-Gold Ratio , Oil-Gold Ratio