Remember a few months ago a thread on the Gold:Silver Ratio....

DoubleEagle59 · February 25, 2008 1:06PM

A few months ago I was explaining how to exchange gold for silver back and forth according to the ratio in order to increase your PM holdings.

My last exchange back in Oct/07 was to exchange 36.5 oz of gold for silver and I got 2036 oz of silver (ratio of 56:1)

Tomorrow, if the ratio stays in the low 51's:1, I plan to exchange this 2036 oz of silver I have for Gold. Because of the lower ratio, I should get 39 oz of Gold.

So in a matter of 5 months, without buying or selling, I have acquired an additional 2.5 ounces of Gold.

This is why I stressed that if you are into PM's for the long haul, you must implement this plan to further increase your 'stash' of PM's, without the risk of day trading (buying on the dips and selling at the peaks).

Bear · February 25, 2008 1:38PM

Isn't there a cost to these

trades back and forth?

DoubleEagle59 · February 25, 2008 1:57PM

cost is usually 1% or slightly less.

on the above deal, I'll probably be paying him $300 to $400 for the 'exchange'. The ratio for that day may get me an extra 2.8 ounces, but in reality, I only get 2.5 ounces, as the difference is his fee.

So I don't get quite the exact ratio quoted on kitco, but it is very close.

Snapdragon · February 25, 2008 2:37PM

Geez I would have thought that was counter intuitive...at least on this most recent trade. It seems to me the trade is to convert gold to silver at the moment. Edumacate me

Snap Dragon

RedTiger · February 25, 2008 3:21PM

What about (cough) taxes? Selling generates a taxable event, unless someone is playing fast and lose with the tax laws. Taxes would seem to wipe out any minor gain. Holding one type of metal over time means the taxes are deferred until the sell date.

What is the reasoning behind exchanging now? That I would find more interesting than the rest. 56 to 51 isn't much of a swing to be playing, considering the transaction costs, the tax consequences and the risk.

ProofCollection · February 25, 2008 4:31PM

I do remember your post and it sounded like a pretty good idea. But I have the same question about the ratio... 51 to 56 doesn't seem like a big enough swing. Is this a minor swing you're playing? If I remember, the chart made it look like you'd want to wait until it hit 40 or so.

To answer the other question about taxes... you can't let taxes scare you from taking profits. If your money can get a higher return elsewhere, you're probably better selling and moving the cash. It's easy enough to do the math.

BECOKA · February 25, 2008 5:31PM

Interesting,

I am also curious about the small ratio difference why trade now and not when the different is a little more? Who do you trade with?

Sorry, I don't remember your other thread.

greghansen · February 25, 2008 8:34PM

Interesting. I also missed the earlier thread. If somebody has it saved can you post a link please.

tychojoe · February 25, 2008 9:09PM

DoubleEagle59 wrote about trading on the ratios in Why is silver lagging behind gold?

I find this editorial on Investmentscore.com instructive, too: Gold, Silver and the Dow

jmski52 · February 25, 2008 9:29PM

I am putting new money into silver at the moment. I don't think that $18.00 is that low especially since there are no major stockpiles left.

OTOH, there are major stockpiles of gold laying around all over the place, and that makes it subject to market manipulation, re: IMF announcing gold sales, with US "approval." Hell, nobody asked me if they could do that! In fact, I don't know of any Congressional Hearings on the matter, either.

One thing is for sure, every time I turn on CNBC another bank is "marking their loans to market" or some such nonsense. Why can't they just say, "the banks and FED screwed everybody and now they are trying to cover their a**es with more BS."

That being the case, I don't care what IMF pretends to do or continues to jawbone about, both gold and silver are still going up. Add platinum and paladium to that forecast too. And milk, and wheat, and gas. And propane. Sheesh.

DoubleEagle59 · February 25, 2008 9:39PM

I agree that it may have been too early in the ratio move to exchange silver for gold.

However, it's been stuck at 55:1 for about 5 months now and this recent move to 51:1 has got me thinking that I must take advantage of this before it goes back up to 56:1.

Just like the movement in any metal price, nothing goes up or down in a straight line. There is volotility. Yes, I do agree over time it's heading lower (possibly to around 30:1). But, I'm thinking along the way, it's going back up to 56:1 and when it does, I'll be exchanging my newly acquired gold for silver.

Worst case scenario, if the ratio keeps dropping steadily, then at least I've acquired 2.5 ounces of gold for nothing.

DoubleEagle59 · February 25, 2008 9:49PM

Interesting article on the history of gold:silver ratio ....

gold:silver ratio info

ProofCollection · February 25, 2008 10:59PM

What form of gold and silver do you usually get?

DoubleEagle59 · February 25, 2008 11:25PM

bars

joeyuk · February 25, 2008 11:27PM

RedTiger · February 26, 2008 12:45AM

<< I agree that it may have been too early in the ratio move to exchange silver for gold.

However, it's been stuck at 55:1 for about 5 months now and this recent move to 51:1 has got me thinking that I must take advantage of this before it goes back up to 56:1.

Just like the movement in any metal price, nothing goes up or down in a straight line. There is volotility. Yes, I do agree over time it's heading lower (possibly to around 30:1). But, I'm thinking along the way, it's going back up to 56:1 and when it does, I'll be exchanging my newly acquired gold for silver.

Worst case scenario, if the ratio keeps dropping steadily, then at least I've acquired 2.5 ounces of gold for nothing. >>

So you're not going to pay the taxes!? I wouldn't be posting that on a public board...

Seems like if gold has gone from around $700 to $950, taxes will eat all your 2.5 ounces and then some. The only way it really works is if there is no price gain in the metal a person is holding and the other metal drops, then there is no tax liability.

jmski52 · February 26, 2008 12:55AM

Hanging your hat on a ratio is like putting all of your trust in chart reading. They both respond to what has already happened.

Yes, it's nice to be able to spot a trend, but ignore the fundamentals at your own risk.

ProofCollection · February 26, 2008 12:55AM

<< Seems like if gold has gone from around $700 to $950, taxes will eat all your 2.5 ounces and then some. >>

How do you figure? At $940/oz, he made $2350 on his last trade. 15% capital gains would be $352.5. Are there other taxes? He still came out ahead.

Deadhorse · February 26, 2008 1:00AM

<< I agree that it may have been too early in the ratio move to exchange silver for gold.

However, it's been stuck at 55:1 for about 5 months now and this recent move to 51:1 has got me thinking that I must take advantage of this before it goes back up to 56:1.

Just like the movement in any metal price, nothing goes up or down in a straight line. There is volotility. Yes, I do agree over time it's heading lower (possibly to around 30:1). But, I'm thinking along the way, it's going back up to 56:1 and when it does, I'll be exchanging my newly acquired gold for silver.

Worst case scenario, if the ratio keeps dropping steadily, then at least I've acquired 2.5 ounces of gold for nothing. >>

I remember the first post very well and have thought about it many times since then.

Weren't you talking about a ratio swing of 45/1 to 55/1 in that post? I'm going from memory here.

I've considered it but with only a small % of my holdings. I'd have to hit several shops to do it, if I could do it at all.

While most shops around town have lots of gold due to short sighted sellers taking quick profits on the few coins they have, it's fairly difficult to find any 100 ounce bars of silver right now. I did grab 20 of them over the weekend, but they had just come in the door late Friday and I had them put away for me within minutes of when the shop finally did get some. There aren't even that many 10 ounce bars available right now. I'll only buy those if I can get them at the 100 ounce pricing.

jmski52 · February 26, 2008 1:03AM

Remind me again why 56:1 is important.

Deadhorse · February 26, 2008 1:04AM

<< 

<< Seems like if gold has gone from around $700 to $950, taxes will eat all your 2.5 ounces and then some. >>

How do you figure? At $940/oz, he made $2350 on his last trade. 15% capital gains would be $352.5. Are there other taxes? He still came out ahead. >>

The capital gains tax on precious metals and coins is 28%.

The people who deal in paper got the break, those of us who only trade in real money were given the short shrift.

TPTB like to manipulate the sheeple's actions. They always have and they always use the tax code to do it.

Deadhorse · February 26, 2008 1:09AM

<< Remind me again why 56:1 is important. >>

I don't believe it is, other than the fact that it's about as high as we've seen.

We could see 60/1 at some point, though it seems unlikely to me.

I think the ratio is going to drop and continue dropping in the foreseeable future.

jmski52 · February 26, 2008 1:11AM

I think the ratio is going to drop and continue dropping in the foreseeable future.

I see a smaller ratio becoming more "important" if there is ever any rationale to pinning arbitrary importance onto after-the-fact data.

dac076 · February 26, 2008 2:32AM

There may be a ratio between gold and silver, but since they're both p.m.'s don't they move together (for the most part)? In that case, you're limiting your potential gain. At the same time, you still have the risk that they'll both lose value due to a drop in commodities. It's like trading one stock for another, and then back. You still have stock market risk.

DoubleEagle59 · February 26, 2008 2:37AM

There may be a ratio between gold and silver, but since they're both p.m.'s don't they move together (for the most part)?

Not necessarily.

The beauty of this system is sometimes (like the last time it happened) when we have those awful one day huge losses, the ratio changes quite dramatically and you can actually increase you PM holdings on a down day such as this.

Metalsman · February 26, 2008 2:45AM

<< What about (cough) taxes? Selling generates a taxable event, unless someone is playing fast and lose with the tax laws. Taxes would seem to wipe out any minor gain. Holding one type of metal over time means the taxes are deferred until the sell date.

What is the reasoning behind exchanging now? That I would find more interesting than the rest. 56 to 51 isn't much of a swing to be playing, considering the transaction costs, the tax consequences and the risk. >>

What about what he asked?.. Dont want to answer?

DoubleEagle59 · February 26, 2008 3:06AM

What about what he asked?.. Dont want to answer?

At the moment, I haven't pulled the trigger yet on the trade.

Also, and more importantly, the end profit will be going to the taxman when I cash out anyway. This won't happen for quite awhile and will include any 'incremental' increases that I make in these ratio exchanges.

Metalsman · February 26, 2008 3:13AM

<< A few months ago I was explaining how to exchange gold for silver back and forth according to the ratio in order to increase your PM holdings.

My last exchange back in Oct/07 was to exchange 36.5 oz of gold for silver and I got 2036 oz of silver (ratio of 56:1)

Tomorrow, if the ratio stays in the low 51's:1, I plan to exchange this 2036 oz of silver I have for Gold. Because of the lower ratio, I should get 39 oz of Gold.

So in a matter of 5 months, without buying or selling, I have acquired an additional 2.5 ounces of Gold.

This is why I stressed that if you are into PM's for the long haul, you must implement this plan to further increase your 'stash' of PM's, without the risk of day trading (buying on the dips and selling at the peaks). >>

I think the question asked refered to your trade above Oct/07. That would be a trade/sale taxable event for 2007 would it not?

ProofCollection · February 26, 2008 4:38AM

Are trades taxable? I think they might not be. Like when you trade in a $10k car for a $20k car, you pay only taxes on the $10k difference. Taxes may only be due and payable after a sale, not a trade... Anyone know for sure?

sumrtym · February 26, 2008 6:29AM

<< Are trades taxable? I think they might not be. Like when you trade in a $10k car for a $20k car, you pay only taxes on the $10k difference. Taxes may only be due and payable after a sale, not a trade... Anyone know for sure? >>

They are taxable. That's why the "trade to increase holdings" while sounds good doesn't work out so well. Now, if you could do it tax free, it's a total different story, but I know of no way to do it short of having some sort of Roth IRA with physical metal holdings (I don't know if that's even possible). A silver to gold or gold to silver is not seen as a "trade" per say by tax law, they are seen as entirely different entities, thus are seen as separate sell and buy transactions. That being said, then yes, only the GAIN on the gold or silver at that time is taxable (you need records on your buy prices).

tincup · February 26, 2008 11:40AM

Hope you continued holding off on that trade! Silver had a kickbutt day, and continueing tonight overseas.

ProofCollection · February 26, 2008 12:22PM

Yes, it's cleared $19!

Remember a few months ago a thread on the Gold:Silver Ratio....

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