Yesterday we noted that gold gained a little over 5% during 2011, while other precious metals actually dropped against the dollar. We want to keep these stats in perspective though. Silver’s dual role as a store of value and a significant industrial resource, from computer technology to medical applications, brings a volatility we don’t see in gold. And this volatility is also promoted by its role as poor man’s gold.

As we noted yesterday, however, first glances can be deceiving. We need to keep a few things in mind. For instance, gold and silver both saw record highs during 2011. But, perhaps even more revealing is the significant rise in silver in 2010. Ending 2009 at 16.99, silver then screamed to 30.63 a year later.

In the last ten years silver has seen only one other year of decline, when in 2008 it dropped from 14.93 to 10.79. This represents one of two down years in the last decade, a time during which silver rose from 4.56 to 28.18, a 613% return. During the same decade gold climbed from 278.35 to 1566.40, a 563% return.

Another consideration in regard to these numbers would be to compare the ratios. The silver to gold ratio was 61/1 at the beginning of 2002. A decade later it’s interesting to note that this ratio is almost the same, at 56/1. This certainly gives investors something to think about, considering that the historical ratio has been about 14+/1.

The chart below shows the movement of gold and silver, as well as their ratio, since the dollar was completely severed from gold. At the time, the ratio was about 20/1. You can see that the red corresponds with the numbers on the right. The entire graph is scaled to a 15/1 ratio. In other words, if you see gold at 1000 (on the left) then silver would be 150 (on the right). If the ratio had remained constant, then the ratio line would be flat at 20 (on the right) and both gold and silver would basically overlap all the way up the graph. As you can see, we’re a long way from $230 silver (click on the chart to open it in another tab where you can enlarge it).

Below you’ll find a similar graph including just the last 10 years.

Platinum rose from 481 at the beginning of 2002 to 1397 by the closing day of 2011. This represents a 290% return. Palladium hasn’t moved as much, but still offered a respectable 152% return, increasing from $430 to $654 over the last decade.

The DIA rose from 10073.40 to 12217.56 over the past decade, realizing a return of 121%. One must remember that the core stocks in the DIA change over time as well, adding an unrepresented dynamic to these figures.

Are these statistics conclusive? Other than the fact that we can see what has happened, not necessarily. In other words, they do not tell us what will happen in the future any more than a rearview mirror tells you where you’re going. However, they can give us some clues as to what to expect, especially when viewed through the lens of such factors as CPI, quantitative easing, unemployment, international markets and other elements that come into play.

Has this been THE decade of precious metals? We are convinced that we haven’t seen anything yet. While it would be foolhardy to proclaim what decade will be crowned with that honor, it does seem almost certain that 2012 will claim a spot in that historical marker.

Another dynamic that we have yet to discuss is underlying value. And this is the thought we’ll leave you with today. If you have a stock and the market crashes hard, what is the value of that stock? What if nobody wants to buy stocks? What can you get for that piece of paper? Now, under the same scenario, what is the underlying value of your one ounce gold coin? Can it ever really go to zero?

This is significant in regards to the opportunities for wealth preservation found in precious metals. While they may not rise as fast as other, more exotic, investments, they will always be a store of value. Consider this carefully as you approach a new year that appears to promise some exciting economic changes and challenges.

via Precious metals during the decade of 2002 to 2011. | The Gold Informant – Not for the weak minded.

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