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Gold versus Silver


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Gold gets most attention. But there are some who pay quite a lot of attention to silver.

So how do they compare ?

 

Here is a chart of gold from 2003, showing how gold tends to go through a cycle.

I've marked the percentage moves.

Please note up arrow % relative to start price, and the down arrow % are price falls relative to the top price. Hence why the up + down does not equal 100%.

That way you can see a potential gain if the buy at the bottom, and a potential loss if you buy at the top.

 

Gold_2003to2008_volatility_080430.gif

 

 

And a very similar chart for silver:

 

Silver_2003to2008_volatility_080430.gif

 

 

And a reminder of why gold/silver go through these cycles (from Jim's site):

 

TheGoldCycleFromDanNorcini.gif

 

 

You can see how since 2003, and I think generally, silver is a lot more volatile than gold.

This suggests to me that if you have confidence that you are buying at a bottom, then silver is a better option. But if you are buying on the way up, with the potential of a step back down, then gold will give you less of a loss.

 

I'm wondering whether it is possible and sensible to trade between the metals for a % of your portfolio, in order to attempt the best gains, and minimum losses.

For example, at the moment, if you think we are close to a bottom, it seems sensible to swap some gold for silver, and when the price starts to get near to an overbought state, to swap some silver back to gold.

 

 

Does anyone have a gold/silver swap routine ?

 

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Come on guys, tell me if this is a stupid idea.

 

The lower the gold/silver price goes, assuming you still believe in a long-term bull market, the more this seems like a good idea.

 

I'm itching to transfer some gold to silver to adjust the ratio of gold/silver (more silver) to increase my volatility exposure, on the hope when they do start back up silver will outperform gold.

 

I'm thinking of gradually transferring to average out the change.

 

I'm not breaking any goldbug rules am I ? :D

 

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Come on guys, tell me if this is a stupid idea.

 

I am only trading silver. I use gold chart only to see where silver will go. The gold/silver ratio is a good indicator. it fluctuates between 50.80 in good times and 54 in the worst times. Silver is a tiny market compared to gold, so you can make more profit/loses on this volatility. I believe fundamentals are more favorable for silver this year because that is what jewelers offer in their stores against gold, also as you say less people pay attention to it, so you have more chances the gold/silver ratio go lower.

BTW, Robert Kyosaki buys silver:

and many, many people start buying silver because of its potential

http://www.silverstockreport.com/

 

 

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Come on guys, tell me if this is a stupid idea.

 

I'm not breaking any goldbug rules am I ? :D

 

I think "stupid" is quite a subjective term. I've tended to hold 50% Gold, 50% Silver when it comes to PMs. Silver made me by far the most during the time it was appreciating (Jan -> Mar)... and since then has done the most damage. Thus proving itself as a kind of "leveraged gold".

 

I know Silver is viewed as more volatile but I really can't see it taking a dive if gold takes off. IMHO Silver will go to $25 easier than gold will go to $1650.

 

So, despite it "killing me softly" I'll be continuing to back silver in equal proportions to gold, maybe even 60:40.

 

(but don't take my advice, I've not been too successful of late, as you know :))

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  • 3 months later...

With the massive drop in silver outstripping gold, now seems like a great time to change your portfolio more towards silver from gold, IMO.

And best of all, it involves no selling. Just swapping. GM is ideal for this. I wish I earned commission !

 

It's is also suggested by Ted Butler here:

 

The Lessons of a Lifetime

By: Theodore Butler

http://news.silverseek.com/TedButler/1219089988.php

 

For those investors capable of switching gold owned into silver, this is a particularly opportune time to switch, as silver prices have been manipulated much lower than gold prices. Silver is cheaper, compared to gold, than it has been in a long time. That can’t last. Yes, gold looks cheap here and appears to be also tight on a retail supply basis, but the big difference is this; due to silver’s industrial consumption nature and deeply depleted world inventories, higher prices for silver will not cure a shortage for a long time.

 

Investors should recognize that the manipulative sell-off may have created the very springboard that will cause the price of silver to soar. This is not about some academic discussion on whether silver is manipulated or not. This is about identifying and taking advantage of a potential price explosion. It has been my long-held premise that before we took off to the upside, we were likely to get a super smash to the downside. I think this was the super smash.

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Came across this commentary today which I found very interesting - http://www.investmentrarities.com/bestofjimcook09-14-04.html.

"Will silver be more valuable than gold some day, as Jerome Smith suggested? There’s around four billion ounces of gold above ground and around one billion ounces of silver. All that gold is worth 200 times the silver. Yet 150% of each year’s silver mine production is necessary for vital industrial purposes. Most of the silver ever mined is used up and gone forever. There’s been a silver shortfall every year for 20 years but the price has failed to reflect this, despite the fact that a shortfall is one of the most powerful influences in establishing a price."

 

Note, it was written in 2004.

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I've read a lot of similar stuff about silver.

Maybe a more visual demonstration of the relative prices is in order.

 

Silver is $13.27/oz

 

Gold is $815.60/oz

 

That means you could buy:

 

1. 1oz of gold. One coin.

or

2. 61.46oz of silver. That's 61 coins (close to 2kg).

 

But the main point of this thread is a look at the relative volatility of the two in the relative short-term.

Even if silver out-performed gold in the long-term, I suspect it would still be better to go up on the silver spikes, and come down on the gold dips.

Unless silver goes mad and tries to catch up with gold :blink:

 

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  • 4 weeks later...

Steve has just pointed me to this thread after posting the below on the gold thread.

 

I have been watching the Gold:Silver ratio chart and the USDX chart. I have noticed recently that the movement in G:S ratio appears to be around 4 days behind the USDX, and have been swapping Gold for Silver via GoldMoney. I swapped at 72 and am hoping to change back at around 45.

 

Is anyone else doing this?

 

Check the charts out;

 

GS2.pngUSDX2.png

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hmmm......................has anyone got an explation as to why the g:s ratio has ;been steady at 54 for the last 10 months ;but has rocketed uup to 74 recently although it looks to be dropping now (67 on 22sept)

http://stockcharts.com/c-sc/sc?s=$GOL...5820&r=8842

 

it has not reached the highs of 80 in 2003 or 100 in 1990

http://www.gold-eagle.com/charts/gegsr.html

 

also of note is that Pt has hardly moved

http://www.kitco.com/charts/techcharts_platinum.html

 

should one long silver and pt and short gold, i wonder? any views?

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Is that a trick question ? :D

Because silver went down more than gold :lol:

 

I'm afraid I still find looking at ratio charts less than obvious.

I think this makes it more obvious visually:

 

GoldandSilver_080924.gif

 

Obviously silver went up more than gold, and then they both stayed around the same level. Then gold got hit, and silver got well and truly hammered !

IMO gold will rise and silver will rocket.

 

Chart from:

 

Gold & Silver: http://stockcharts.com/charts/performance/...LD,$SILVER

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not a trick qu; i'm really calling into question the strength of the gold rally......it does seem to be forming a topas i write - 4 dojis in arow - i'm reflecting the idea of pixel

http://stockcharts.com/c-sc/sc?s=$GOL...4300&r=7465

 

You need to click the "linkable version" on your stockcharts to make them work.

 

I think this slight indecision in Gold at the moment is down to 'Paulsons Plan' being debated at capitol hill.

 

Still seems to be following;

 

GS2-1.pngUSD2.png

 

 

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  • 3 weeks later...

Here's an article by Ted Butler on the merits of swapping gold to silver currently.

 

An Exceptional Opportunity - Ted Bulter commentary - 7/10/08

 

When fear and emotion run high, as they presently do, it often creates exceptional profit opportunities. In other words, when everyone is running scared and is concerned about risk, it is precisely the time to look for rewards as well. We are currently positioned the best I have ever witnessed for risk and reward in silver. The downside looks extremely limited and the upside looks explosive. Yes, volatility is great, but everything is lined up perfectly.

 

I would like to revisit a familiar theme - the suggestion that gold-heavy investors take advantage of the extreme undervaluation of silver compared to gold. This is not intended as a knock on gold, or a suggestion that gold can’t or won’t go higher. It would not surprise me if gold moved much higher. I hope that it does. Then why would I suggest that gold owners convert some of their gold into silver? For the simple reason that silver should climb much higher in value than gold. Maybe two or three times, and perhaps much more.

 

In fact, if silver eventually reverts to its historical ratio of 16 to 1 to gold, that means silver would have outperformed gold by more than four-fold. At that rate, every dollar invested in silver would return four times more than a dollar invested in gold. What are the chances that old ratio could return? Quite good, I think.

 

The article also includes another below it, which seems very bullish for silver.

 

COMING ON STRONG

 

By James R. Cook

 

I talk to silver analyst Ted Butler every day and lately I’ve never heard him give a more optimistic view on silver. About eight years ago he affiliated with my company and we’ve literally had thousands of conversations since then. Never was he willing to put his predictions in any kind of time frame. Now, in our private conversations, he’s telling me this is it. A price explosion is imminent. He may not want to go public with that bullish forecast, but with me it’s different. He claims the shortage in silver must now worsen and the price rise high enough to change the dynamics of silver forever.

 

The one thing he always told me for the past eight years was that before the big upward explosion took place, the price would be crushed. He said the big shorts would be among the first to notice a shortage in silver. They would then do everything in their power to extricate themselves from their short position. They would manipulate a big sell-off so that when those who held silver on margin were forced to sell, they would buy back their silver and thereby reduce their short position. They could never cover all of it, but they would make their short position more manageable. They would still be trapped and suffer losses when silver rose, but they would only lose a toe and not a foot.

 

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Thanks :D

 

It's not a bad article, but it doesn't seem to say much that hasn't been said before.

And it's lacking some of the heart stopping tables and predictions :D

 

But, maybe it's a useful read for those new to the idea of silver, or those who haven't thought of swapping some gold for silver at the lows.

I many ways I'd like to have a greater % in silver, but for technical reasons I'm more or less at my limit.

 

Certainly silver at around $12/oz looks like an incredible bargain considering it was over $20 !

 

It may be be a better option for anyone starting into PMs, rather than starting with gold at all time highs against some currencies.

Even though it's very volatile, the downside risk at the moment looks pretty small compared to the potential upside.

 

I was a bit surprised by this bit:

 

Regular readers know I don’t envision silver as being used as money again.

 

IMO the potential for silver being used as money is one reason for having some.

 

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I was a bit surprised by this bit:

 

Regular readers know I don’t envision silver as being used as money again.

IMO the potential for silver being used as money is one reason for having some.

 

I believe that he is talking about silver actually being used as currency again, rather than it's monetary values. I think silver could be included in new asset backed currencies.

 

 

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I have a question puzzling me.

 

1] If someone has most of their net worth in gold and also cash.

 

2] And the silver/gold ratio is above 80.

 

Should they buy some silver with cash or with gold?

 

That depends on what (they think) is going to happen!

 

If they are concerned about which way things will fall and reckon there's a chance (fiat) cash may be king - but also think PM's could be where it's at (lets say they give it a 50/50 probability) then trading gold for silver might make sense (if they already have an equal amount in cash and gold). If they are confident PM's are the best bet and that fiat is toast then they should trade cash for silver.

 

However, as you know, silver and gold, although both monetary metals, are not the same and, for lots of reasons, may perform quite differently. Eg. silver may increase more then gold (eg, ratio to 1/35) but may also be left behind if it gets treated as a commodity. G&S both doing very well is a possibility but there are lots of different ways things could pan out...

 

I think gold is safer but silver investments make some sense too. Hard to call! I messed up (missed planned exit range by a few weeks) and ended up with an 'uncomfortable' amount of silver! That said, I think it looks like a real bargain - I would likely have put back in a lot of what I planned to take out by now!

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I have a question puzzling me.

 

1] If someone has most of their net worth in gold and also cash.

 

2] And the silver/gold ratio is above 80.

 

Should they buy some silver with cash or with gold?

For my self I used sterling. Seems a one way bet for now as in can it get any lower?

 

I will invoice you my consultancy bill,

No cheques please.

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That depends on what (they think) is going to happen!

 

If they are concerned about which way things will fall and reckon there's a chance (fiat) cash may be king - but also think PM's could be where it's at (lets say they give it a 50/50 probability) then trading gold for silver might make sense (if they already have an equal amount in cash and gold). If they are confident PM's are the best bet and that fiat is toast then they should trade cash for silver.

 

However, as you know, silver and gold, although both monetary metals, are not the same and, for lots of reasons, may perform quite differently. Eg. silver may increase more then gold (eg, ratio to 1/35) but may also be left behind if it gets treated as a commodity. G&S both doing very well is a possibility but there are lots of different ways things could pan out...

 

I think gold is safer but silver investments make some sense too. Hard to call! I messed up (missed planned exit range by a few weeks) and ended up with an 'uncomfortable' amount of silver! That said, I think it looks like a real bargain - I would likely have put back in a lot of what I planned to take out by now!

 

Cheers. I think cash will prove to be the joker not the king. King of currencies is gold. Still I guess I should hedge my opinion and hold onto a little cash... hard to do but.

 

Yes, I agree with you that silver and gold are likely to perform differently in the deflationary interim before the inflationary climax. I see silver continuing to act as lead until the commodity bull reasserts itself at some later date.... perhap in a year or two.

 

Given this scenario and given gold will hold its own as money, the ratio should remain high for a while providing excellent buying/swapping opportunities. It will take one cold hearted and calculating decision by the investor in me before I could swap some gold for silver. But looks to me to be a good bet. Plus will be nice to diversify. :)

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