Tuesday, December 28, 2010

Gold Silver Ratio

This is one of those things that when I'm driving in the middle of nowhere Minnesota I think of calculating, but then forget to do by the time I get home. You hear a lot about gold, but nothing of silver. And (more or less) it seems silver is not as bubbly as gold is (certainly no doubt to the advertising and press it gets).


Anonymous said...

Since Jan 1st 2001, GC1 Comdty is up 5.47 times whereas SI1 Comdty is up 7.51 times.

Check different time windows...


Anonymous said...

Very interesting things happening. Black helicopter midsets are becoming more mainstream among people I talk to with respect to the money supply and the economy going down the drain in the next 1-4 years. Buy metals now, use it to buy food 4 years from now.

S. Harvey said...

metals wont buy you food.

the idea that gold somehow maintains its 'value' when paper money doesn't is only achieved if you don't apply the same lens of criticism to paper money as you do the metal one. Paper money has value only because we as a whole say it does, we accept it in return for our labor and goods. It is a place holder for labor and goods, gold is exactly the same thing. In day to day life it has no utility.

With the dollar inflated to infinity, how many loafs of bread does a gold coin get you? If you had 10 loafs how would you value them in gold?

If you want to talk hard currency start talking tools like bullets, or food stuffs.

Anonymous said...

S. Harvey, food and ammo are goods, not money. Money is the one thing that *everyone* recognizes as money, regardless of their diet or the caliber of their guns.

Today, fiat currency fills the role of money. If this fiat evaporates, gold will take its place and gold's *real* value will skyrocket, maybe 10x relative to food and fuel, and 100x relative to real estate.

As money, gold is far superior to silver. A million dollars in gold weighs 22 kg with a volume of 1.14 liters, versus 1015 kg (96.8 liters!) of silver. One fits easily in a briefcase, while the other requires a heavy-duty pickup truck.

For more on the folly of investing in silver, read this:

Zookeeper said...

Geez, there has to be something better in terms of comments here...

1. The historical gold:silver ratio is 15:1. Buying an ounce of gold cost about 15 ounces of silver for most of civilized history, thousands of years.

2. For some reason, the ratio detached from 15:1 in the late 1800s and ranged as high as 80:1 in 2003. Today (Happy New Year!) it is about 45:1.

3. So which "mean" will the ratio revert to? 15:1? That would put silver at 3 times its current price if gold did not move at all.

4. Markets are markets...who knows what moves them? But my money is on silver, Great Panther, Orko, Fortuna and Silver Wheaton. Look at their charts. You don't have to chase price, but draw the trend on each chart, and put in a buy order on the trend line.

5. There will come a time to sell. It will be when the silver stocks you bought so reluctantly are leaping by several percent most days. When the leaping accelerates (ie is no longer mere mortal leaping, but something almost spiritual) sell 20% of your current holdings. Then sell another 20% after another 15% rise. And again.

6. Sell out your last outrageous increase (ie the remaining half) and buy something inflation-proof that pays good dividends. Royal Dutch Shell, or something. It ain't going broke in your lifetime.

7. Do this right, and you will have succeeded in buying inflation-protected yield at 1/3 of the going price.

But then again, you might just hold your t-bills and CDs because the market has too much risk. Your call.