The price relationship between silver and gold traces its roots all the way back to around 3000 BC when the first Egyptian Pharaoh, Menes, declared that one part gold equals two and one-half parts silver. That was the birth of the modern-day silver-gold ratio. Many traders watch the ratio differential the two precious metals to determine the value proposition between the two. As the quarterly chart of the price of gold divided by the price of silver highlights, the silver-gold futures ratio traded to highs of just over 93:1 in 1990 and lows of around 15.50:1 in 1980. The average and the midpoint of this price relationship have been around 55:1 for over four decades. In October 2010, the ratio was trading around 71:1 which tells us that on a historical basis, silver is cheap when compared to the price level of gold.
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