Thursday
The Gold, Silver, Copper Connection
My only regret in Dawn of Gold (apart from a typo) is that I now believe that I was in error in dismissing the importance of copper to the Real Story of Money. I explained its value as merely a function of legal tender laws, which meant that if 12 copper pennies were accumulated, they could be exchanged for one silver shilling. I am now far from certain that this is true. More on that at a future date – maybe.
But the relationship is of more interest than just its possible monetary role. One of the other connections has relevance in the present.
The ratio of Gold to copper is almost as interesting as that of Gold to silver. Amongst other factors, it informs us of the state of not only the economy, but economic expectations. Gold and copper sit at opposite ends of a spectrum. While copper’s fortunes go up and down with the economy (hence, Dr. Copper), so, when the economy is crumbling (or utterly collapsed as now), there is a flight to the only store of stable value and the $POG* rises.
The crustal relationship between Gold, silver and copper in ppm is:
Gold 0.004
Silver 0.075
Copper 60.00
From that can be derived the crustal ratios:
Gold to copper 15,000
Silver to copper 800
Gold to silver 18.75
The crustal ratios are not of immense importance, but are of some interest.
The current (23rd April 2020 about 9am in Australia’s East) value ratios (rounded) are (all in spot troy ounces):
Cu = ($0.15743) Gold to copper 10,881
Ag = ($15.06) Silver to copper 96
Au = ($1713.00) Gold to silver 114
This is not too far from their above ground, historical (since Ancient Egypt) value ratios, but a far cry from their existing value ratios. It is the $Ag value that is out of whack. The $POS** has been slugged primarily because of the manufacturing shutdown.
Does the extreme undervaluation of silver mean that it will finally attract some institutional interest? It is usually considered too cumbersome to trade, but in an age of minimal profits and zero interest rates, that may be about to change.
* The US dollar price of Gold
** The US dollar price of silver