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The Beginners Guide to Gold/Silver

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I wrote all this a while ago, but I thought I'd post it here in the hope that it will help anyone just starting to think about buying gold/silver.



If you want to buy some but have the company you buy it from look after it for you, then the options are:



Gold Money (James Turk):

Gold = 3.39% over £6k, Silver = 5.25% for <£6k, 4.99% for more.

There is no storage fee for gold in the London vault; only a monthly account fee. A storage fee of 0.24% per annum (2 basis points per month) is charged for gold stored in the Zurich vault, with a minimum fee of 0.1 grams of gold per month.

If you own silver, a storage fee is deducted monthly from the amount of silver in your account. The fee is 0.99% per annum (0.0825% per month), with a minimum fee of 0.2 ounces of silver per month.



Bullion Vault is cheaper, but don't do silver. Has a more complicated system, but is more flexible.

Charges: http://www.bullionvault.com/help/QuickStart.html (from 2.06% over 2 years)


Another option is The Perth Mint Australia.


They do various options. And will store for you and do delivery later if you wish.

Depending on which country you are in, you may need to go through one of the listed brokers in your country.






If you want to purchase gold and have it delivered:


In the UK



In the UK, give these guys a call - I have used them and they are VERY professional and very competitive on pricing for 1 oz bullion coins - you can order over the phone with a debit card and they mail them to you discreetly and insured!!!!


Baird and Co

Prices of coins: http://www.goldline.co.uk/bullionCoinsPage.page


Coin Invest Direct


Prices in GBP: http://www.coininvestdirect.com/main.php?a...rate=pound_rate


Tax Free Gold





If you are in NZ, I think the best option is:


The best option is 24ct gold kiwi coins. No GST, and they charge from 6.5% downwards depending on quantity. But the good thing is they buy them back at the spot price.

So coins work out cheaper than bars, and if you have to use them, more saleable than bars.


Tel. 0800 696 468 (0800 NZ MINT)




Yes you can put pension money into gold.

Here is one example for the UK:


Gold SIPP - Gold Pension





IMO if you want to do more trading in gold, then consider ETFs

But, IMO these are not the safe haven that having allocated physical gold is.

You will need to check the prospectus carefully to see what you are actually buying.

Here are some examples:





IMO you should only invest in what you understand. So inform yourself before doing anything.


For daily information from an experienced gold expert.








This is a very long but very informative read about gold.



Gold Is Money - Deal with It! - Remarks by Robert K. Landis to the Association of Mining Analysts, London, England, October 2, 2003



For daily news and great articles:





For a good background read, and good info on BV (unfortunately BV Watch has closed. You may be able to find cached versions)

Bullion Vault Watch - discusses the different ways to sown gold, including whether Bullion Vault is safe, including charts of how much gold they have.


This article: http://bullionvaultwatch.blogspot.com/2008...vault-safe.html

Found from this iTulip thread: http://www.itulip.com/forums/showthread.php?t=3143


You can get the latest prices from:





From: http://www.kitco.com/market/bp_charts.html


Neat multi-currency chart




From http://www.kitco.com/images/live/gold.gif


And Silver in US$:


From: http://www.kitco.com/images/live/silver.gif



At the moment 1x 1oz coin costs around £460 or NZ$1200.

So it's possible to invest say 10 or 20% of your liquid portfolio in gold, how ever much money you have.


IMO think about buying gold like buying another currency. There is an exchange rate between all the paper currencies and gold. That's why the price of gold fluctuates relative to the paper currencies.

Gold is a currency that cannot be printed, and pays no interest.


Also, please remember the price goes up and down. Even during a gold bull market, there will be large fluctuations in the price. IMO buy and hold, and ignore the dips in between.

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Why buy gold, and is now a good time?


Firstly, things go in cycles. No single investment category, whether it be houses, stock, antiques or gold are a good or the best investment all the time.

The easiest way to see what is the best investment at any one time is to look back in history and see what you should have bought LOL.

Hindsight works 100% :)


I think the first thing to understand is that all the currencies of the world are paper money. They are not backed by real assets. If you collected all the money in the world each year, you'd find each year there was more money.

Imagine if you were playing Monopoly and rather than playing with a fixed stack of notes, the banker handed out a few notes to everyone each day. What would happen to the price of the houses on the board? With everyone having more notes to play with, the prices would rise.


That is inflation of the amount of money creating price inflation.


In order to try and save the US, the Fed is handing out more and more money. Just like they did last time, and the time before that. So what you ask, that's just the US?

Well, the currencies of the world are linked, and the other central banks are forced to do the same.


So, you say the price of gold is at an all time high. Why has it gone up? Because the paper currencies of the world have gone down in value. You need more of the stuff to buy stiff now.

So yes, gold is at an all time high.

But that doesn't take any account of inflation!

That would be like saying "15 Melrose Place was £82,500 in 1980, and it has just topped that price today". You would be stunned if house prices were the same today as they were in 1980.

But that is what has happened to the gold price.


What you need to do is work out what the gold price would be today if it had simply gone up with inflation. The fiddles official ones or the real inflation :)

In real terms, the price of gold is way way below the previous peak. It is still at the "15 Melrose Place 1980" price.


Why should the price of gold go up?

Because unlike every other currency in the world (they are all paper fiat currencies as described above), gold is the only currency that cannot be 'printed'. There is a very limited amount of it.

It is a perfect currency because it does not burn, does not rust, can be divided, combined. It lasts. And it is rare.

The fact is, every time there is fear of a currency collapse, or fear of a stock market collapse, or fear of a global economic collapse, people flee to the one historical safe haven. And that is gold.

So any debate about "gold being a relic" etc is irrelevant. People do just flee to the safe haven that is gold.


Because there is a very limited quantity of gold in the world, and the amount coming from mines is very small compared with the amount already mined, even a small flight to safety creates a huge price increase. Likewise of course, if people leave gold when things become 'safe' the price can also fall a lot.


So how much gold should you buy?

Ultimately that is up to you.

But if you are seeking a safe haven, then you can do some simple sums to work out what % of your liquid portfolio makes sense being in gold.

Your liquid portfolio is the amount of 'cash' you have. So it excludes money put into a house.


Suppose you put 10% into gold. And suppose all the global currencies fail. The value of that gold will rocket upwards. Your 10% gold may well be worth at least as much as your entire lost money.


But what about if just your currency drops significantly ?

The US$ is dropping because the interest rates are being cut. And chances are will be cut again and again in an attempt to save the US economy.

The GBP is also dropping. Same problems, but behind the US.

In a less severe economic situation how would your 10% do?

Well, as the GBP or US$ falls, the price of gold in those currencies will rise.

Even the rising Yen will probably do less well than gold, for exactly the same reasons. An increase in the amount of paper money, making things more expensive.


If not gold what?


What else can you buy when currencies are falling in value? You could buy tins of baked beans etc. But they cost more to store and they go off.

That is why gold is such a good safe haven. It is small and doesn't perish. That makes it cheap to store. And it is easy to trade. The whole world trades gold.


Rather than looking at the gold price in pounds or US$ ignoring inflation, try looking at the price adjusted for inflation.


The inflation adjusted price is the purple line. It doesn't look so high now does it :)




There is a lot written about gold, so you don't need to take my word for it. And you shouldn't.

As I said, you need to inform yourself, and make up your own mind.


If things turn bad, or really bad, then gold will rocket. 100% guaranteed.

The worst thing for gold is if the world economy is doing really well, and everyone is happily piling their money into one of the fiat currency booms, like stock, housing, tulips or carbon credits.


Low interest rates and high inflation are very very good for gold.


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What tends to happen is that people are very happy and invested in whatever is the current boom.

Houses in the US, UK, NZ etc have been one of those booms.


When things start to turn, people start to feel uneasy. The "worry level" is quite low. I have tested this elsewhere, and it is still relatively low.

With that level of worry, a small number of people decide " a bit of gold wouldn't do any harm".

The price of gold rises a little.


Then more bad news arrives, and the worry level rises. Those who have some gold think"Hmm, the price has gone up, but I'm worried enough to pay that for a bit more". Others start to get worried enough to buy for the first time.

The price of gold rises a little.


This continues as the news gets worse and worse.

On the way, good news comes out. The price retreats some as people sell and take profits or no longer think they need so much gold, and fear the price will fall.

But, the next bit of bad news pushes demand back up, and the price rises.


You cannot win this game. Your options are:

1. Buy no gold. And watch as the price rises, fretting that you have no safe haven.

2. Buy some, and continue buying as the price rises. You end up paying more and missing some of the gains, but maybe you don't make such a big mistake if things suddenly turn out rosy.

3. You buy all the gold you can right at the start. You make the most, but risk the most too, because you only know how things will turn out later. The first signs of bad news could be wrong.



Another point is this. It's nearly always a bad idea to put all your eggs in one basket.

That normally applies to buying stocks or putting money in a bank. You spread it around. If one fails, you don't lose the lot.

But that also applies to currencies and categories of investment.

If you have all your cash in pounds, then you are gambling on that one currency. Likewise NZ$, US$ etc.

You could view gold as an alternate currency which behaves in the inverse to the paper currencies. As such it is a good way to diversify.


Feel free to ask questions. I will try and answer any, or provide links to support what I say.

Good luck.


PS It is better to panic first, than be the last one fleeing :)

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Should I put all my cash into gold then? I could make a fortune


I doubt many informed people would suggest putting that great a percentage into gold.

Whatever potential gain you have convinced yourself you can make, don't do it.

Nothing is a sure bet. Nothing.


The idea of having say 10% in gold is this.

If the price collapses completely, to zero (rather unlikely), then you lose 10% of your money.

On the other hand, if you lose the 90% in a global financial collapse, the 10% will save you, and be worth at least what you had.

You can view it as an insurance policy, which might well may out a bonus if you get the timing right.


And now does seem to be one of those once in a century times.


I haven't mentioned selling yet.

Firstly, I would not recommend getting scared at every price drop. You have to think of this as a long-term investment. And that means years not days/weeks.

Like you buy a years insurance for your house.


Secondly, when the price has gone up, and things are starting to look safer, sell some. Enough so that if the price drops back, you are still in profit. That way after you've sold enough, you can't lose with the rest if it becomes worthless.

Don't try and hang on for the very top price and maximum gain. You won't make it.

Don't be greedy.


I wouldn't be posting this if I wasn't personally very concerned about the state of the worlds banks and the prospects for the world economy. I have probably read a lot more than most people, simply because I've made the time for it, and so I am probably ahead of the curve on the worry level.

If I am wrong, then with 10% gold, you won't have much to complain about.

But, if I am right, I might just have given you the incentive to safe guard your future.

In which case, I'll happily receive 1x 24ct gold coin in thanks LOL


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This isn't strictly about gold, but is a very good example of what creates fear, and a flight to a safe haven.

I'm almost speechless when I look at this chart:




US - Bank Reserves Go Negative



:blink: :blink: :blink:


Next months data will be here:




US Net Free or Borrowed Reserves of Depository Institutions


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This article covers things quite well for the current state of things:


The Time For Gold Is Now!





And this chart shows predictions for the price of gold for various "flights to gold".

You can see what might happen if just 1% of US household finance went into gold.





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This is where that chart comes from:


There's Just Not Enough Gold; Modeling A Dollar Flight To Gold



The author does not consider any of the above modeled-gold prices to be forecasts. He does consider them to be very illustrative of how sensitive the price of gold is to even minor shifts of investment from the dollar into the gold.


There have recently been a spate of forecasts of upcoming gold price rises based on adjusting for inflation the 1980 peak price of gold. The author submits that these forecasts could be way too low if a serious flight from the dollar to gold takes place.


As a postscript, there remains one important thing to say about how a dollar flight to gold differs from the Internet stock bubble and the Housing bubble. The supply of gold is inelastic. Even though the price of gold has more than tripled in the last few years (from $250 / oz to around $900 / oz), gold mine output has stagnated.


The supply of worthless Internet startups was, as we found out, anything but inelastic. After the mania got going, Wall Street produced out of thing air a limitless supply of worthless Internet startups. Soon the bubble popped and the price of those worthless startups price reverted to their actual value, zero.


Similarly, homebuilders have found that the supply of new houses, while initially inelastic, was quickly made elastic by the flood of houses brought to market. Home prices are now returning to their actual value.


In the first really classic bubble, the Dutch discovered that the supply of tulip bulbs, while initially inelastic, after a couple of growing seasons was completely elastic. The bubble burst and the rest is history.


Because the supply of gold is inelastic, the rise of the price of gold does not constitute a bubble, at least not the same as the Tech bubble, Housing bubble and Tulip Mania. It is not susceptible to the same kind of wall of supply induced collapse.


The dollar is completely different from gold. Its supply, like the other fiat-currencies, is like worthless Internet startups: perfectly elastic. Just as venture capitalists could produce a limitless supply of Internet startups, central banks can produce a limitless supply of fiat currency. It is this very difference in elasticity between the dollar and gold that could trigger a flight (or panic) from the dollar to gold.

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Cartel Manipulation


If you invest in gold, you really need to understand how the market works, and how the price is manipulated by central banks.


This is one place to read about it: http://www.gata.org/


And that means the price has been held artificially low so that the inflation of money isn't so noticeable. The big and interesting question is "can they keep the price low, or will they run out of gold or the ability to hold it down?"

There are some signs that they are starting to fail. Like the price rising and the withdrawal of sale of gold coins from the US Mint.


Anyway, here's an article on manipulation etc:


Half of gold in central banks gone?

Watchdog: 'We want to expose and stop the manipulation'




By the way, if you think gold is an historic relic, and people are stupid to even contemplate buying some, ask yourself this. Why do governments hold gold ?

If you can explain that, please do :)


See also this thread on here:


Manipulation in the Gold/Silver Market



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How Do We Know that Central Banks Rig the Gold Market? They Told Us. - by Chris Powell



But that's the complicated stuff, and we also know for a very simple reason.


We know that the central banks and their intermediaries are working together to suppress the price of gold because time and again they have TOLD us so.


The Washington Agreement wasn't the first coordinated intervention of the central banks in regard to gold. It was at least the second and probably much more belated than that. How do we know?


Because Federal Reserve Chairman Alan Greenspan told us. In fact, he told Congress too. As usual, no one in the financial press seems to have been paying attention.


But on July 24, 1998, Greenspan told the House Banking Committee: "Central banks stand ready to lease gold in increasing quantities should the price rise." He repeated that statement a few days later to the Senate Agriculture Committee:






All this shows that while the formal convertibility of currencies into gold has been ended by the articles of the International Monetary Fund, gold continues in its nature and function as money and as the independent international currency, the competitor of the dollar and the euro -- and that central banks recognize as much, however grudgingly.


So, when buying, if you are lucky, buy in the dips caused by intervention. Take advantage of it if you can.

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Reg Howe - Current MPEG Commentary - Gold Derivatives: Hitting the IceBerg



What is the size of the total short physical gold position, or put another way, how much gold from their vaults have the central banks collectively deposited, leased or swapped into the market through the bullion banks?




Ocean of Currency and Credit.

Historically, the principal monetary function of gold has been to stabilize both currency values and interest rates. See Interest Rates: The Golden Connection (12/27/1999). In recent years, the major central banks, led by the U.S. Federal Reserve, have allowed and encouraged gold derivatives to grow far beyond prudent limits in an effort to silence the monetary alarm that rising gold prices would otherwise have sent as they flooded the world with paper money and loose credit.




Floating on this ocean of unlimited paper, the gold derivatives iceberg threatens a collision with reality that could sink the global financial system and the "Titanic" of paper currencies on which it rests, the U.S. dollar. As the passengers and crew on the original Titanic discovered, even a glancing, barely perceptible encounter with an iceberg can inflict a mortal wound not immediately apparent to the casual observer or even to the trained eye absent a complete damage assessment.


Thus, but for the publicly revealed private comments of Eddie George, former Governor of the Bank of England, the first potentially lethal scrape with the gold derivatives iceberg might never have come to light. See Complaint in the Gold Price Fixing Case, paragraph 55. Sharply rising gold prices triggered that incident, and the question today is whether their recent rally to over $400/oz. is in the process of precipitating another derivatives disaster.


You see, gold is not such a relic is it.

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I think this more or less completes the information on the manipulation of the gold price, and explains very well how the gold market works.


Whiskey & Gunpowder Special Report: Gold Carry Trade

The Real Story Behind the True Gold Bull Market



I would like to use some statistics to inform you as to the implications of gold leasing on the market for gold. Remember that I will use the most conservative numbers I could find.


In 2005, according to GFMS, gold leasing was estimated to have added 2,970 tonnes of supply to the market. In that same year, jewelry demand was 2,700 tonnes, world investment was 736 tonnes, and official central bank sales were 656 tonnes. Over the last 10 years, average mine production has run at an estimated 2,500 tonnes per annum. So the amount of leased tonnage exceeded all of the above-mentioned statistics.


Remember that central banks are not required to report at all on their transactions of loaned gold. So those 2,970 tonnes of extra supply were also counted in central bank reserves, or they were double-counted.


Central banks are the largest holders of gold tonnage, estimated to have around 30,000 tonnes. So they have loaned out approximately 10% of their total reserves.


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Jim thinks a greater % of gold is OK ?(




I live in Canada. In late November and early December 2007 I sold all my equity funds thanks to you and one other.


I bought physical gold and Platinum for 60% of my portfolio (held in two safety deposit boxes at two banks - I think risk of repossession of precious metals in Canada is small).


The remainder is in Canadian Federal Bonds (15%) and Cash (25%).


I enjoyed in 6 weeks an increase of 12-15% in Precious Metal while saving myself from a 10-15% decline in stock funds. Thanks again.


I have 2 questions for you:


1. Do you think 60% is too much for PMs? If so, what allocation do you recommend?

2. What do you think about agricultural ETFs? I feel they will get badly hurt with the recession in the short term, but will do fine in the long term. I like very much Jim Roger's one (RJA:Amex) due to its diversification.



Canadian Friend


Dear Canadian Friend,


I am delighted in your success. That is my reward.


60% is not too much. I assume you have not borrowed money on this position.


The price of food items will rise on balance until the hot/dry weather cycle peaks. That gives you more than three years to run. If you look at the 35 year price picture you would see that some grains are only starting now. What makes you think that a slow down in business means everyone stops eating?


ETFs vary in gold, silver as well as food items. I cannot comment on any particular one without a thorough read of their original prospectus. Some can play paper. Be careful. You have to do your own homework.


Best regards,



He is probably right in today's climate.


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I think this is an excellent article, and covers many questions on why holding gold is a good idea.

Including the old inflation/deflation debate.


This website is exceptional.


A must read


Contrarian Investors’ Journal



It covers economic matters, and gold, with many excellent articles.

It certainly stand out from the crowd.


Why should you invest in gold?



Should you hold gold or cash in times of deflation?



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I think it would be good if we can keep this thread as a beginners guide ie something which answers most of the common questions someone new to the idea would ask.


If you have any suggestions for content, please post it, and I'll edit it into the starting posts,

(it would be good if this was a Wiki....but alas).


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WORTH a look: especially for Beginners


MarketClub's animated Gold technical lecture



"The market really wants to move higher... $1,020, possibly higher"


- Adam Hewson

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Hi Steve,


You have mentioned lots of quality reading and research on gold, what are your thoughts on Silver? I'm more leveraged in silver than gold, I guess the attraction is that if silver is much cheaper than gold there is more room for it to maneuver on a breakout. At least I hope silver will shadow golds gains whatever happens.


The dual usage of silver in both industrial and jewelery is a plus, the way I understand it is that silver has some unique properties that could prove useful for future technology too, such as replacing platinum in catalytic converters (http://www.reuters.com/article/rbssIndustr...T26231020080423). I think Goldfinger brought this Catalyst subject up before, but something turned out to be a bit of a damp squib about it.. need to find the post.


I've read some posters speak of silvers use in Solar panel construction, however I have not been able to find out much about this via my own googling.



In regards to the supply of freshly mined silver, this old article suggests that new silver is often a by-product of mining other metals, and therefore is it is quite difficult to increase the mining output. Although with the recent general rise in commodities, I guess people will be doing a lot more mining for anything that comes out.



If market manipulation applies to the price of gold, should it not also apply to the price of silver too? I would imagine that silver would be a much tamer beast to control than the gold bull. If the SHTF and both metals are unleashed, perhaps silver would have more lost ground to catch up on.


Just some of my random thoughts on the matter, not very well researched at all, but fun to think about! If would be extremley interested in your and others thoughts on the matter.


Edit: I've re-read the silver thread, alot of good stuff in there! Im still interested in your thoughts as just a quick summary of how you see the current silver position

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Hi Steve,


You have mentioned lots of quality reading and research on gold, what are your thoughts on Silver?



Please don't assume just because I write a lot that I'm any sort of expert.

I started off with mainly gold, with a very small percentage of silver "as a bit of a gamble". Since then I've learnt more about silver, and:

1. Feel comfortable with the volatility ie I'm happy to see it drop 20% knowing I won't panic and sell at the bottom. The recent drop being a good example :D

2. Feel that silver has great prospects, and so have a much larger percentage in silver now.


Because I'm not keen on selling gold or silver at what look like overbought prices, I am now using a strategy which involved simply changing the gold/silver ratio. So when the price drops, I load up on silver, and when the price starts looking like it will drop, I'll swap most if not all the silver for gold.

That way I hope to take the escalator up on silver and the stairs down on gold :D :D

It seems to me a mid-way point between buy and hold and trading in and out which I don't feel at all comfortable with (that FIAT currency and all :lol: )


I think the market manipulation is slightly different in gold & silver, from what I've read. They seem to talk about naked shorts in silver which I don't think they suggest in gold.


The fact I posted all my writing on gold and forgot about silver I think says something. Silver if an oft forgotten metal. And I still tend to look at gold first.


OK, here comes some things I've written before on silver:


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(This was written some time ago)


Silver is more volatile. So bigger gains, but to avoid suicide, IMO only part of your PM holdings.

Also, the public attention is on gold, and I've read that silver lags gold because the attention starts on gold, and then when that's gone up, people look for a cheaper alternative. And that's when silver really rockets.

I've also read an article which suggests silver is now less owned, and maybe due a comeback.

The potential is HUGE. So IMO worth a punt of say 10% to 20% of your PM portfolio.



Deep Into The Danger Zone

By: Theodore Butler & Israel Friedman




Please sit down before reading these numbers.


Gold Breaks New Record - Public Waking Up!



As Mike Maloney has been shouting from the rooftops: "This is not the time to be in stocks or non cash-flowing real estate. As investors we are in the rare situation where the safest investment (the investment that has been a valued form of wealth for over 5,000 years) is also the investment that history says will offer the greatest potential gains in the upcoming years."


Since this huge shift in the foundation of investing gold has increased 3.36 times and silver 4.24 times. The amazing thing is that history shows we are not even close to being done with this cycle.


His forecast? $6,000 gold and $600 silver by 2016. Nope, that was not a typo (and that is even using his conservative formula). :blink: :blink: :blink:


Sounds crazy right? But would you have guessed $900 gold was just around the corner when the price was less than $300? This same mentality happens in every bull market. People just can't believe that the investment that the cycle is favoring is going to keep going up until the investors all decide at once that it must be for real and then it becomes the "can't lose investment." This is when the public rushes into the investment that had been going up steadily and drives the price vertical. This happened in tech stocks in the late 1990's and more recently in real estate.


Of course if you look back even further you find history repeating itself yet again. In 1970 gold was $35 an ounce and in 1980 in had risen to $850 an ounce turning every $10,000 into over $230,000. Of course gold then went into its down cycle from 1980 to 2000 but the clock kept turning, as expected, and we are in the upwave precious metal cycle again. These cycles just repeat over and over and are one reason why some people are able to predict the correct investments to be in while others sit in yesterday's investment just hoping they will come back up.


As these precious metal prices hit record after record the general public start to wake up to this sector when they see it on the news night after night. These are the folks who really light a fire under an investment when they try to jump on it in increasing numbers. This period for the precious metals is just starting now.


That silver prediction sounds completely outrageous.

Silver is currently ~$18/oz. $600/oz is 33x more !!!

So $10,000 would become........................................... $330,000 :blink: :blink: :blink:



Why the silver price is set to soar



Demand Building for Gold and Silver as Currency of Legal Tender for Merchant Services




This might be one of the definitive articles. It certainly covers a lot of the main points.


This article covers the long-term gold/silver ratio.

And the use and supply of silver.

It was written in 2003.




Franklin Sanders



Since 1990 fabrication demand has averaged 156% of yearly mine production. For every ounce of silver the mines produced, industry consumed one and a half ounces of silver.


Keep one thing in mind: the key to the silver price is monetary demand. Other categories of demand alter only slowly over time due to technological or economic changes. Supply-demand imbalances in commodities can persist for a surprisingly long time without moving the price sharply. In the past decade, the price of silver has been practically flat, with a few spikes, because monetary demand has been absent. Strong, sustained silver moves occur when many people decide suddenly they want silver because it is money. Today, when stocks, currencies, bonds, and other paper assets have begun to disappoint investors, investor attitudes are shifting. What begins as a trickle ends as a tidal wave when the panic peaks. When public revulsion at the US dollar begins, the tidal wave will become a tsunami. Silver, far more volatile than gold, will benefit most.


In the 1960 - 1980 precious metals bull market, gold rose from $35 to $850, a 2,429% increase. At the same time silver rose from 90 cents to $50, a 5,556% increase. Silver rose 2.3 times as fast as gold.


What is the obvious reason for silver's greater volatility? Compared to gold silver is a tiny market, so the same amount of money drives silver much higher. That's why you expect to see silver rising faster than gold in a bull market - the ratio ought to be trending down as both metals rise.


That's not a misprint. 90c (yes cents) to $50 (dollars).



Based on year end average prices, the 1792-2002 mean ratio is 31.32. If the ratio merely returned to that mean over the bull market's course, silver would rise about 2.4 times faster than gold. However, based on the extreme ratio swings of the last 125 years, and the ratio's drop in the last precious metals bull market, I believe it is safe to speculate that the ratio will drop much, much lower than the 200 year mean. In fact, my target is 16:1, the bottom of the last bull market.


Never skew your portfolio more than 70% to silver. That is, at current market value you should never have more than 70% of your total investment in silver. Keep the other 30% in gold. Always take delivery of your physical metal. Never leave silver in storage with any dealer.



This chart shows the gold/silver ratio. The mean is 31.32.






This article suggests silver is VERY undervalued compared with gold.

Just check out the per capita amount of silver in the 2nd table !


The Real Gold/Silver Ratio Part II

By: Theodore Butler

From 2006.



I'll try reproducing it here:







What this table tells us is that, on a per capita dollar basis, the world’s citizens have never owned more gold or less silver than they do today. The world’s citizens own more than 35 times more in gold, expressed in dollars, than they owned 106 years ago. Yet at the same time, the world’s citizens own less than 40% of dollar-denominated silver than they did 106 years ago. Once again, these figures should shock you, just as they shocked me. And please remember, this is also an apples to apples comparison.



Some might suggest that the great value disparity between gold and silver points to the realization of the superiority of gold as the one true money. Perhaps. But why is this disparity showing up only against silver? Gold compared to the other precious metals (platinum, palladium, rhodium, iridium), the base metals, oil, broad commodity indices, real estate or the stock market, does not suggest a gold overvaluation. As I said, this is severe silver under valuation, not a gold over valuation.



This is a great chart:




This is a 600 year graph of silver prices and silver/gold ratio from 1344 to 1998 as shown in 1998 dollars.


from: http://goldinfo.net/silver600.html



The Real Deal

By: Theodore Butler

26 February, 2008



Warnings about not buying REAL ALLOCATED silver. Silver you know exists, and is owned by you.


While I have intentionally tried to deliver this message as a warning, so that innocent silver investors can avoid a nasty potential surprise, there is an almost unspoken upside if enough investors follow my advice. Because I am convinced there are more than a billion ounces of silver tied up in unbacked silver certificates and storage schemes, if only a small percentage of those investors, say 5% or 10%, switch to storage programs holding real silver with serial numbers, the impact on the price of silver could be profound. All other things being equal, such an amount of switching could cause a doubling in the price of silver, in my opinion.
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All In


By: Theodore Butler and Israel Friedman

24 March, 2008



Just for the benefit of newer readers (as longtime readers already know this), the tech funds are large pools of investment money that buy and sell futures contracts on every commodity based solely upon price, or technical, signals. They buy on the way up and sell on the way down, as moving averages are penetrated in either direction. They have no interest in the commodity itself, nor its value or supply/demand fundamentals, just the price action. In other words, the tech funds buy and sell many tens of millions of ounces of silver, for example, with no concern about the metal itself. All the tech funds care about is price movement and trying to capture as much of a price trend as they can. (I am not offering a value judgment of their behavior, just an explanation).


The dealers, or large commercial traders (mostly big banks), also know how the tech funds operate and always take the opposite side of whatever the tech funds buy or sell as counterparties. In my opinion, the dealers rig the market by colluding with one another against the tech funds. They do this by withholding their collective bids and offers at opportune times, namely, when they know the tech funds are about to react to a major moving average price signal. This is precisely what occurred in the 48-hour price massacre in gold and silver.




The sharp sell-off has resulted, in my opinion, in the cleansing out, or removal, of most, if not all, of the technical fund leveraged long positions in silver and gold. I think the amounts come to 20,000 contracts (100 million ounces in silver), and 75,000 contracts in gold COMEX futures (7.5 million ounces). This is my analysis, but we will have to wait until this week’s COT Report is issued to verify the actual figures.


The important thing is that, if the tech funds have, in fact, been largely liquidated by the dealers, then the reason for a potential sharp sell-off has also been eliminated. If one were cautious about being fully-invested in silver because of the possibility of a sharp tech fund sell-off, there is little reason to maintain such caution. Certainly, if anyone held off buying silver because of anything I had written about a potential sell-off, he or she should hold off no longer. Lower prices from here are not to be feared, as they will only strengthen the bullish case.



And I'll emphasis this bit:


What does a shortage in silver mean? In a word, everything. If the initial clues of a silver shortage get transformed to the industrial silver users and large investors, in terms of increased physical demand for 1000-ounce bars, the industry standard, then say good-bye (and good-riddance) to the silver manipulation. The big dealers can sell unlimited quantities of manipulative paper silver contracts created from thin air, but they can’t sell real 1000 oz bars unless they have them. If they don’t have the real goods and there is a surge in demand for real bars, the jig is up. That’s why I encourage you to insist on securing the serial numbers of every 1000 oz bar held in storage for you


The fact that there is unprecedented demand for silver at precisely the same time as a sharp and sudden sell-off in the price, should confirm to even the most obstinate skeptic the existence of a silver manipulation. So clear is this evidence of manipulation, that there is no longer any credible public denial of it. Now only the CFTC and the NYMEX contest its existence, as they must at all costs.


Finally, an often repeated message for gold-only investors. If you own no (or little) silver, and have insufficient capital with which to invest in silver currently, please switch some gold into silver. You must clearly see the evidence of a growing silver shortage. The clues and reports of shortage are, most emphatically, silver specific. There is no such shortage in gold, nor will there ever be, in my opinion. That’s because gold is not industrially consumed to the extent of silver. That does not mean gold can’t soar in price. In fact, I hope it does, as it will underscore the value of silver. But your common sense should tell you that a precious metal in shortage must climb more sharply in relative value, compared to a precious metal not in a shortage, especially when the shortage-prone metal is so undervalued to begin with.

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No worries Riggers :D

I think it could be a lot better, but I don't really have time right now.

Maybe it'll get better as new things come up.


One obvious thing (which I know very little about) would be a simple guide to buying coins. Where, what, etc etc

If anyone wants to write one :D :D


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IMO if you want to do more trading in gold, then consider ETFs

But, IMO these are not the safe haven that having allocated physical gold is.

You will need to check the prospectus carefully to see what you are actually buying.

Here are some examples:



I hold a small amount in the ASX listed GOLD BULLION SECURITIES LIMITED (GOL) fund. I presume this is classed as an ETF. They hold reserves to match investor funds so would seem safe although I am considering using the Perth Mint next time.



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