DAVID MORRISON<br /><strong>CFD MARKET STRATEGIST, GFT<br /></strong><br />PLENTY has been written about gold&rsquo;s recent advance and its break above the $1,000 mark. And if you are bullish on the yellow metal you may also want to look at silver. Until the late 1800s, the gold-silver price ratio was fairly constant at around 15 to 1 due to their relative abundance and because they were both used as currency. But by the early 20th century this ratio had widened to 100 to 1 as supplies of silver increased relative to gold and simultaneously silver was dropped as a currency. <br /><br />Silver became cheap and abundant as huge above-ground stocks existed. But the metal was found to have many useful properties, and has since been consumed extensively in industrial processes. The gold-silver price ratio moved back down to reach 15 to 1 in the 1980s but today, with gold at $1,000 and silver at $16.50, the ratio has risen to 60 to 1.<br /><br />On the supply side, estimates put the total volume of gold production in all history at 5.3bn ounces, and 43bn for silver, giving us a ratio of 8 to 1. But of those 43bn ounces of silver, most have now been used up. In fact, estimates suggest that above-ground stocks now stand at only around 1bn ounces, whereas nearly all of the 5.3bn ounces of gold still exists.<br /><br />In addition, silver has taken a hit because it has lost its status as an investment metal. For a long time, it has been considered solely as an industrial commodity and so has recently suffered on two counts: a perception that it is abundant, and the economic slowdown.<br /><br />However, silver could well come back into favour as an investment vehicle. China is already encouraging its citizens to buy the physical metal and there is the potential for a supply shortage. Industrial consumption may continue to slow, but so will supply if the price of silver doesn&rsquo;t appreciate considerably in relation to its production cost. Conversely, as we have seen recently, any improvement in investor sentiment has seen industrial metals spike up in price.<strong><br /></strong>