The ratio varies wildly. In 1970, it was about 20 and it peaked at just under 100 in 1991. The average is around about 40 – and that is the key to any silver bull's argument. Historically, it appears that silver is undervalued in relation to gold, they argue.
In 2010, the ratio has been as high as 72, recorded in February, and is now just below 60. Many believe it could have further to fall.
The reasons for gold's outperformance are well documented – inflationary fears, currency woes and safe-haven demand – but does the declining ratio towards its average mean that silver is going to continue with its charge forward?
Most analysts are not that bullish – with a price of about $24 targeted for next year. There are some, however, that believe the silver price will become much more lustrous over the coming years.
James Turk, who founded bullion dealer GoldMoney in 2001 and manages $1.2bn (£758m) of assets, thinks prices could hit $50 by the end of next year, but accepts that there will be volatility along the way.
Mr Turk believes quantitative easing will devalue currencies and send precious metals much higher.
"Just pick up your newspaper to see what central banks are doing to destroy currencies," Mr Turk says. "Unlike the 1970s, there are no safe havens from currency debasement – such as the deutschemark."
Mr Turk is more bullish on silver than gold. "The problem is the volatility," Mr Turk says. "Essentially it is a cheap form of gold, but it is not for everyone because of the volatility."
He says investors should always buy the physical metal and not paper and advises a portfolio of one-third silver to one-third gold.
Suki Cooper, a precious metals analyst at Barclays Capital is not so bullish. She has an average target for silver next year of $22.2, expecting the metal to peak in the second quarter at an average price of $23.7.
"Silver mine supply is still growing and industrial demand – although improving – remains relatively weak. Silver is still in surplus, but it has benefited form safe-haven buying," Ms Cooper says. "The price could fall sharply if investor interest wanes."
Already investor interest this year is much lower than last year, which is surprising given the recent bull run.
In the current year to date investment inflows into silver have amounted to 1,377 tonnes. In the nine-months to September 2009 it was 2,942 tonnes – with full year 2009 inflows at 4,112 tonnes, Ms Cooper notes.
However, Mr Turk remains unbowed. "I expect the gold-silver ratio to fall back below 23 over the next three-to-five years," he says, despite most analysts thinking this is unlikely.
Precious metals consultancy GFMS also believes that there is a risk of a sharp fall in the silver price.
Silver has risen on gold's coat-tails, but it is also used in industrial processes so it has risen on hopes of a recovery in the global economy too.
Philip Klapwijk, GFMS's chairman, said last week that the absence of an improvement in the economy will be a negative for the silver price.
"If you think gold will continue to advance in the medium term, then why wouldn't silver necessarily follow suit? One reason could be that if economic prospects take a bath, that side of the argument for silver becomes a lot weaker," Mr Klapwijk said.
"In the current situation, silver is benefiting from both general optimism on industrial production in emerging markets, and the investor interest in safe-haven assets like gold," he added.
All of this implies that, on a fundamental basis, silver is looking more toppy than gold at the moment after its recent outpeformance.
Instead of chasing the price of the physical metal, investors may want to invest in silver mining companies that are expanding production, such as the FTSE 100 group Fresnillo.
In the first half of this year, the group's cash cost of production was just $3.58 an ounce – one of the lowest in the industry. It aims to bring on line one new mine or expansion per year until 2014.
Of course the share price will be hit if the silver price falls, but the company will remain highly profitable. But cautious investors may want to wait for a dip before they pile in.
Quantitative easing could boost oil prices
Oil prices could rise by more than a quarter if there is more QE – even if demand stays weak, according to new analysis from Bank of America Merrill Lynch.
The broker's economists expect the Federal Reserve to expand its easing programme by $500bn (£317bn) to $750bn as early as the first quarter of 2011.
If the global money supply expanded at the same pace as this, gold would move 15pc higher and oil prices by 26pc, the broker argues.
This could bring Brent crude oil prices up from an average of $78 a barrel this year to an average of $83 a barrel next year irrespective of demand, Merrill said.
COPPER for delivery in three months hit a two year high on the London Metals Exchange on Friday, following upbeat manufacturing data from China.
The price rose to $8,078 (£5,101) a tonne, the highest level since August 1 2008, but prices eased in the afternoon.
The purchasing managers index rose to 53.8 in September from 51.7 in August, the China Federation of Logistics and Purchasing said. A figure above 50 indicates expansion.
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