Will silver outperform gold once the economy improves?
PerryHall
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Since gold is primarily a monetary metal and silver is primarily an industrial metal, do you think silver will outperform gold once the economy improves? Anyone know what the experts are predicting?
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"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Since gold is primarily a monetary metal and silver is primarily an industrial metal, do you think silver will outperform gold once the economy improves? Anyone know what the experts are predicting? >>
Silver has become an industrial metal only in recent times...the past 150 years. And it's industrial use is destructive, once used it's gone forever. It's still primarily a monetary metal.
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Why should the gold-to-silver price ratio abide by history?
And it's industrial use is destructive, once used it's gone forever
Silver used in any physical or chemical reactions is not destroyed and can always be reclaimed. A nuclear reaction can destroy it.
I think gold will outperform silver because silver, as as investment, is subject to those double digit VAT taxes throughout Europe. Gold is not. So the Europeans are apt not to bother with investments in silver.
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<< <i>Gold to silver ration is way out of historical whack and to return to norms silver will have to outperform gold by a long shot. >>
It is?
With the exception of a few very brief spikes higher and lower, it looks like the ratio over the past 25 years is pretty darn close to the current ratio.
Edited to add: I believe the ratio will continue to widen. Gold will outperform silver.
Knowledge is the enemy of fear
I think one drags the other with it.
That said, I still believe if people in general realized what it really is (just metal), that it would be the same price as aluminum, steel, copper, etc. Just like diamonds, it's just a rock and there's a bunch of 'em.
Too many positive BST transactions with too many members to list.
Silver to soar.
–John Adams, 1826
<< <i>I think one drags the other with it.
That said, I still believe if people in general realized what it really is (just metal), that it would be the same price as aluminum, steel, copper, etc. Just like diamonds, it's just a rock and there's a bunch of 'em. >>
Like a dollar bill is paper much like toilet paper
<< <i>
<< <i>I think one drags the other with it.
That said, I still believe if people in general realized what it really is (just metal), that it would be the same price as aluminum, steel, copper, etc. Just like diamonds, it's just a rock and there's a bunch of 'em. >>
Like a dollar bill is paper much like toilet paper
exactly!
Too many positive BST transactions with too many members to list.
<< <i>Here is what Ted Butler thinks. From an April 8th interview.
Silver to soar. >>
Of course he does. Look at the name of his website.
"Real" money has no interest in silver. There are people out there who want to protect BILLIONS of dollars. They will choose gold over silver. If you had $10 million (which in the scheme of things isnt that much $$$), and wanted to put $1 million into PMs, you would much rather buy 900 ounces of gold than 55 thousand ounces of silver. Silver will go along for the ride, but will underperform gold.
Knowledge is the enemy of fear
We won't have a silver problem for awhile if ever.
<< <i>Gold to silver ration is way out of historical whack and to return to norms silver will have to outperform gold by a long shot. >>
That's assuming that it *does* return to its norms. But without anything else helping it, that wouldn't happen (silver was ~15-16:1 historically because that is the rate that was set by governments, when bimetalism was in effect; when bimetalism disappeared, so did that ratio).
Of course, that isn't to say that the ratio won't improve (I think it will). But it is going to take other factors to do so (e.g. industrial use that buys without regard to price, which we have).
So, is the chart indicating that the best times to dump gold and to accumulate silver were in '87, '98 and '06?
Conversely, is the chart also saying that the best times to dump silver and accumulate gold were in '91, '03 and late '08?
Somehow, I suspect that it's not that simple.
I still believe if people in general realized what it really is (just metal), that it would be the same price as aluminum, steel, copper, etc. Just like diamonds, it's just a rock and there's a bunch of 'em.
At some point, people decide what holds value best in their situation. In the US, we've been lucky on a relative basis because our currency held value in spite of our spending because of our strong world power status and our vibrant economy. Now that the currency and financial markets been screwed with for so long, it's anybody's guess whether the currency will retain value as trust in it and the federal government deteriorates.
If you have a 1 ozer of gold in your hand, there are enough people around who know how to value it that you won't have trouble negotiating a value for it. Gold makes it's own case without the need for a government middleman, or a banker, or a financial consultant to assign a value to it.
I don't know when a tipping point might occur with the dollar, but gold will continue to gain because of the dollar. There are alot more people in this country with their only vested interests tied to the dollar than there are people who have their vested interests tied to gold, so it is reasonable to assume that the majority of people do not want a new system based on gold, since they instinctively know that they would be screwed if such a change occured.
That being the case, we are likely seeing a mass delusion, fed by the government where the dollar remains the currency for the indefinite future. That doesn't prevent reality from asserting itself as the debt will not be paid except via inflation. I have the unfortunate gift of knowing math.
I knew it would happen.
–John Adams, 1826
<< <i>way out of historical whack
Why should the gold-to-silver price ratio abide by history? >>
"Those that fail to learn from history or destined to make the same mistakes."
"The trend is your friend."
Based on year end average prices, the 1792-2002 mean ratio is 31.32. The current ration is over 64. If the ratio merely returned to that mean over the bull market's course, silver would rise about 2.4 times faster than gold.
Ratio screams buy all things silver
If in doubt, buy both!
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Afraid I can't agree (fully) with cohodk on this one. Silver is a pain to hold due to its volume/value. But, it only costs 1/70th of gold per oz. I think that people will find silver more affordable (especially at >1X to 3X today's prices) than gold and that will drive the price of silver to a greater value increase than gold in the future. More up-side with silver I suspect. (Just to be fair, I don't think anyone really knows the correct answer to your question; the solution is buy both and throw in a bit of plat and pall while you're at it.). >>
Im just saying that the BIG money players would rather own gold than silver. Silver is relegated to us schmucks.
KUCH,
I dont think anyone is bearish on silver. What I hear is something akin to this---If gold goes up by 100%, then silver goes up by 80%. I wouldnt call that bearish.
Derry,
As has been stated before, the price of gold and silver were not determined by free markets until the early 1970's, so any ratio before then is useless. Of course many will say that prices today are not determined by free markets.
Jmski52,
Are you referring to the S&P500 etf that goes by the symbol SPY?
Yes, the GSR chart basically says to sell silver when the ratio gets to about 45 and buy when the ratio gets over 80. This doesnt mean you will not lose money, but it does show that gold and silver often outperform each other--sometimes dramatically, to both the up and downside.
Knowledge is the enemy of fear
<< <i>
Im just saying that the BIG money players would rather own gold than silver. Silver is relegated to us schmucks.
. >>
Read this again folks, this is an excellent point. I use this argument every time someone says "We're in a recession! Nobody has money to buy gold so gold is overpriced!" One whale can buy as much gold/silver/stocks/whatever than an ocean full of plankton.
Q: But gold and silver performance has been roughly equivalent over the past ten years, haven’t they?
A: I realize that, and both have performed better than stocks or bonds or real estate. But I am convinced that the facts point to silver vastly outperforming gold. May I speak in blunt terms?
Q: I think my ears could handle it.
A: I think that gold investors who don’t hold a significant silver exposure have been lucky to date that gold has kept pace with silver. And I think these gold investors are being given a tremendous opportunity now to convert some or all of their gold holdings to silver.
Q: That’s not likely to happen in a big way, is it?
A: If all the gold investors were to make the switch there is not enough silver. But some can. I hope they do because silver is going to beat the stuffing out of gold price-wise, and there are going to be a lot of gold-only investors who will regret not making the switch.
The guys pushing gold, also agree silver will out perform - Marc Faber, Peter Schiff, Jim Sinclair, Mike Maloney, etc.
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<< <i>Im just saying that the BIG money players would rather own gold than silver. Silver is relegated to us schmucks.
What makes you think the big money players would rather own gold? The big money players would rather own money. They will invest in whatever they think will get them more money. Don't be fooled into thinking they are not buying silver. Why do you think the price has been going up?
Central banks are a different type of big player only because they see gold as money and they do not view silver in the same way.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Cohodk, do you have a chart of gold vs silver over the past 50 yrs rather than 30? I think the 50 yr chart would put silver in a much more favorable light. Are problems today are much more in line with the 1970's than they were with the 1980's and 1990's. Bottom line is that this is all relatively new stuff. We've only been off a metal monetary standard for 38 years. Both metals have been under extreme manipulation since the days of the London Gold Pool (1962-1968). Can't really call them free markets, especially with hundreds of billions of dollars in short derivatives written against both metals over the past 10 years. Besides silver, what other routinely traded exchange commodity has 10-20 yrs of physical production equivalent written against it in derivatives?
If one looks back at the rise in metals from 1961-1980, silver only outperformed gold in a couple parts of that period. And over the entire period it was really only in 1979 that silver started to fly past gold as the Hunts tried to hoard as much physical silver as possible rather than accumulate paper contracts. This was because the FEDs started to put additional restrictions on the trading of paper silver to squash the Hunts. If not for the Hunts change in tactics in 1979 who knows if the gold/silver ratio would have reached the lowly level of 17 in early 1980.
Gold is still the monetary metal of choice and as long as we're in monetary crisis mode, it should outperform silver. But before this bull is over, silver will more than likely take another huge leap to surpass gold. But you might have to wait years for that to happen. The only thing that will trump the monetary mission of gold is if physical silver inventories are found to be almost depleted.
roadrunner
My problem with silver is that its moves are too drastic so that you have to be a trader rather than an investor. When it corrects it corrects too severely for my liking.
If you were lucky enough to buy and hold in the sub $7 range then the $2 spike and the $1.80 rapid retracement are not a problem, I dont do well with whipsaw action.
1. I seem to remember when silver was money, not just gold. Silver may turn out to be a "poorman's gold" when gold accelerates in price.
2. While I was reading this thread I saw an ad for silver by Monex. That's a first...at least for me.
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<< <i>
<< <i>Im just saying that the BIG money players would rather own gold than silver. Silver is relegated to us schmucks.
q]
China has and will continue to buy. I believe they are BIG money players.
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<< <i>
<< <i>Im just saying that the BIG money players would rather own gold than silver. Silver is relegated to us schmucks.
What makes you think the big money players would rather own gold? The big money players would rather own money. They will invest in whatever they think will get them more money. Don't be fooled into thinking they are not buying silver. Why do you think the price has been going up?
Central banks are a different type of big player only because they see gold as money and they do not view silver in the same way. >>
I didnt say there were no buyers of silver and you obviously have no concept of the difference in size between a 65 pound block of metal and a 4000 pound block of metal. I will not debate this further. Time will prove.
Knowledge is the enemy of fear
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>It's easier to get a 10% gain out of silver.... >>
and a 20% loss.............MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>
<< <i>It's easier to get a 10% gain out of silver.... >>
and a 20% loss.............MJ >>
only if you're selling
<< <i>Silver will outperform gold by percentage gain based on today's numbers (gold - 1168, silver - 18.50) compared to those on noon 31 Dec. 2010. >>
Very possibly. If gold is down 10%, silver may be down 20%. Thats a suckers bet.
Knowledge is the enemy of fear
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Roadrunner, I did find this chart, but it is a bit "noisy" and hard to read as it is logarithmic scaled, but I'll try mt best to decipher. Im also not sure of the accuracy of the info.
From this website
The ratio was flatlined from basically the beginning of time until the Civil War when the ratio doubled from about 20 to over 40. Then established a range during the early 1900's from 45 to 65. A brief dip into the 20's during the Depression, then a HUGE spike to 150 when WWII broke out. Then a drop into the high 20's as the gold was repriced after 1933. Silver then suffered dramatically after the 1980 run-up.
To summarize, it looks to me that since 1900 the GSR has averaged in the 50-60 range, spending more time above than below. The GSR has clearly trended higher since 1900, but with great volatility and not getting lower than 25, but pushing north of 100 twice. So, I will stand by my assertion that gold will outperform silver, and that today the GSR seems appropriately valued.
Knowledge is the enemy of fear
I understand the WWII spike, but what in the heck was going on in 1984 (other than 1984) that caused such a differential to occur? Was it simply, "inflation's aftermath"? Since that chart looks like it ended in 2004, it looks like the silver line is still going stratospheric since 2004. Is our inflation-sensitive indicator signalling inflation? Does a bear s**t in the woods?
I knew it would happen.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
<< <i>Interesting thread. >>
thanks to the OP and contibutors.
:clover
i would lean the gold way but most here have forgotten more than i know about the subject. the short squeeze article is interesting, but it seems like it would always bubble easier than gold on a physical in-hand level.
i also think we need to define an "improving economy"
jobs? exports? DOW? housing?...all of these without massive government subsidies and or manipulation.
we are years if not a decade or more away from a real light at the end of the tunnel. some may say we will never get there.
<< <i>
<< <i>It's easier to get a 10% gain out of silver.... >>
and a 20% loss.............MJ >>
In last 2 days, gold down 2.5%, silver down 9.5%.
Knowledge is the enemy of fear
<< <i>
<< <i>
<< <i>It's easier to get a 10% gain out of silver.... >>
and a 20% loss.............MJ >>
In last 2 days, gold down 2.5%, silver down 9.5%. >>
AHHHHH! . . . The Sweet Smell of Silver on SALE ! ! !
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