Pre credit-crunch, gold and silver were moving in tandem, but they have disconnected since then. What's going on? Everybody is asking that question, and probably those who actually know aren't talking. Although silver has industrial uses (unlike gold, which is primarily a value store), silver is mainly produced as a by-product of other mining activities like zinc, so falling economic activity leads to lower silver production: silver production dropped 5% in 2008 and another 6% decline is forecast for 2009. A geopolitical point of interest is that China is accumulating gold; this is not a recent phenomenon (accumulation has been over the past 6 years), but people are sensitive to the dollar losing its status as a reserve currency. But apparently they've been buying all sorts of industrial metals and actually as a percentage foreign-exchange holdings their gold position has declined since 2003.
I'm noodling whether to invest in the gold-silver ratio declining; this would mean going short on gold and long on silver. However I need to get more information before committing actual money.
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