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Play the spread

quickwingquickwing Posts: 1,155
in Precious Metals
The traditional spread of Gold/Silver has been out of whack for several months. The big boys are now unwinding and the current ratio is 77 1/2:1!!! Plenty of time to put on a short gold long silver spread and take advantage of the tightening spread.
OLDER IS BETTER

Comments

  • DeadhorseDeadhorse Posts: 3,720 ✭


    << <i>The traditional spread of Gold/Silver has been out of whack for several months. The big boys are now unwinding and the current ratio is 77 1/2:1!!! Plenty of time to put on a short gold long silver spread and take advantage of the tightening spread. >>



    That used to work all the time.

    Not so sure it will again for some time yet.

    I think it's time to hunker down for now.
    "Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose."
    John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
  • ttownttown Posts: 4,472 ✭✭✭
    Just keep in mind "the spead" used to work because you could get items near spot. That's not the case anymore silver is bring north of $15 an ounce and realistic gold prices are around $1000 an ounce for the physical metals. I wouldn't be playing the buy and sell at preset when this bust it will take off like a rocket. Buy on the dips, that's the way to play it now IMO.
  • gecko109gecko109 Posts: 8,231 ✭


    << <i>Just keep in mind "the spead" used to work because you could get items near spot. That's not the case anymore silver is bring north of $15 an ounce and realistic gold prices are around $1000 an ounce for the physical metals. I wouldn't be playing the buy and sell at preset when this bust it will take off like a rocket. Buy on the dips, that's the way to play it now IMO. >>




    Im almost certain the OP is talking about the paper, not the physical.
  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    If you chart long term trends you will see that the ratio has gone to as high as 100:1. Until that trend is sharply broken back, there is a reasonable chance that the spread will actually worsen and you will loose additional money on a "safe" trade.

    roadrunner
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • quickwingquickwing Posts: 1,155
    Well they ridiculed my gold hedge idea on Oct. 15th also. Generic Gold Hedge Guess everyone has, and is entitled to their own opinion. However I am more familiar with these strategies than those that don’t use them. I think the spread is beginning to tighten but it’s sure not a “safe” bet.
    OLDER IS BETTER
  • storm888storm888 Posts: 11,701 ✭✭✭
    "Well they ridiculed my gold hedge idea on Oct. 15th also...."

    /////////////////////////

    That is a good hedge, though poorly structured in your example.
    (I don't think folks were really ridiculing it; they just don't get it.)

    Such a hedge should almost never have more than about 20%
    MAX on the short side, if the holder wants to keep his physical
    position in play. If he just wants insurance - and is willing to
    miss some potential future profits - the percentage can, obviously,
    be higher.

    My GLD SHORT against the box has been in place for months.
    BUT, I also have a much larger net-SHORT position in GLD.
    In my case, the physical is now really just a little insurance
    against the larger paper SHORT.

    A cheap hedge can be constructed around physical silver, using
    a SLV SHORT. As long as the physical premium stays high, very
    little money buys lots of insurance with an SLV SHORT.

    ........

    Straddling the "ratio" is probably just a lottery ticket. The ratio
    doesn't really mean anything; just coincidental numbers, absent
    a government peg.



    Folks Who Bite Get Bitten. Folks Who Don't Bite Get Eaten.
  • quickwingquickwing Posts: 1,155
    888 I like both GLD & SLV.

    The linky was (as no one apparently gets or doesn't read) an alternative to selling and rebuying generic gold coins. Gold was beginning to look soft and I didn't want to sell 50oz of nice cherry generic coins and rebuy them at a lower price. I wanted a full hedge on those coins and was willing to lose money on the hedge (as my gold coins increased) if I made a bad call and gold went up.

    I do agree that for most long term collectors playing short term speculative price movements, a complete hedge is costly and high risk. And 888 you mentioned "cheap" hedge. That's why you want to learn as much as possible about different strategies, so you can determine which one has the lowest cost and smallest cash outlay to fit into your plans. Great comments.image
    OLDER IS BETTER
  • percybpercyb Posts: 3,328 ✭✭✭✭


    << <i>The traditional spread of Gold/Silver has been out of whack for several months. The big boys are now unwinding and the current ratio is 77 1/2:1!!! Plenty of time to put on a short gold long silver spread and take advantage of the tightening spread. >>



    Why bother? There's too much upside risk to gold.
    "Poets are the unacknowledged legislators of the world." PBShelley
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