Aren't you guys relying on history for your prognostications on the future value of Gold and Silver ? I do get the gist of the reasoning of Gold over Silver as a store of wealth based on the current ratio of Au to AG but are we not missing the consumption aspect of silver compared to gold? From what I read over 90% of all Gold ever mined is still in existence either as investment or in other forms such as jewelry etc, whereas Silver is and has been used and disposed of and continues to be used and disposed with an ever increasing rate. Current reading just here on this site shows us that Vault stockpiles are evaporating and Silver is now being consumed straight from the mines for investment and industrial use. What if in fact Silver became more expensive than gold? It has happened with platinum, and also for a time with Rhodium . Say you have trigger point based on a GSR of 5:1 and jump off silver right there but then silver just keeps on going and going till it gets to 2/3/4/5....or whatever and then settles to a similar ratio of PT to AU in todays world ? A big what if but..... "# There's very little left on the planet. The U.S. Geological Society said just a couple years ago that silver would be the first element in the periodic table that would become extinct. It's incredibly bullish. The USGS said that would happen by 2020. So if we're in the situation where we can run out of silver, the price clearly has to go up, because you can't obviously run out of silver. What will happen is, the price will have to go to a price level where it's economic to recycle it. " http://www.kitco.com/ind/morgan/aug072009.html Anyone got a source for this statement? Sure there is a lot of hype but the numbers in regards to supply and demand stack up "Government Stockpile: None." http://minerals.usgs.gov/minerals/pubs/commodity/silver/mcs-2011-silve.pdf What if the GSR just reached an Harmonious parity ? Where to then ?
Both supply and demand determine pricing so if the supply of silver and gold is at some ratio than there's a good chance the ratio will be reached, that's how the historical ratio was determined orginally. If the demand for silver is increasing at a greater rate than gold then the GSR will most likely fall to a point where supply and demand balance again. The increase in investment demand would probably be represented by a shift of the demand curve to the right in the simply graph below resulting in a higher price. Of course above ground supplies will come into play but only some of the stock of gold and silver will be supplied at different price points and the stock of gold and silver maybe at a ratio less than mine supply now anyway. My thought is the ratio blew out during the recent bear market because the stock of above ground silver was used as supply to meet industrial demand keeping the price of silver down and the GSR high. Silver supply of course is complicated by the fact that a lot is a by product so you could find the GSR overshoot somewhat till new silver mines come on line. P | D \ / S | \ / | \ / | \/ | /\ | / \ | / \ | / \ |____________ Q In the real world who knows.
Supply and demand are indeed paramount in determining price of silver and therefore also the GSR. Supply is dwindling fast and demand in increasing all the time => price march of silver will continue and GSR will continue to fall
One of the reasons I think the GSR shouldn't drop into the 20s (hey, I'm no economist or financial adviser though) is that I reckon gold is horribly undervalued at the moment, and at some point whatever is holding the price of gold down is going to lose it's grip. There's simply WAY too much global demand for gold at the moment from a reserves perspective for it to stay this cheap. So while silver is apparently on it's way to $40 and beyond, I reckon gold will see $1700 USD and higher before the end of this year. Either way, I have about 50:50 position in both metals by value.
50:50 is great. I'd suggest trying to get a 75:25 position throughout this year. 75 gold, 25 silver by value. Like gp, I think that the massive manipulation in gold is bound to crumble sooner or later and we'll see a tsunami in the price of gold.
+1 When the party gets going, all these month long waits for inventory etc will really hit home. The beauty of gold in the last year has been the constancy with which the price has remained where it is in AUD. It has been the biggest blessing that we can still buy it at the same price even though it went up 2-300 in USD terms. The thing is that I've been picking up stuff as people think the peak has arrived, and every time a new USD high occurred you'd see a whole bunch of beautiful stuff turn up. In AUD terms it was the same price or LOWER for me. It has been an amazing year in that sense. The sad news is that the stuff has dried up recently. No one is really selling anymore and I wonder whether the public is simply out of all the gold they were hoarding. The benchmark for me is the $200 coin. When that dries up you know that there's something coming up. Currently nothing at all and no one is selling.
My exit plan is .65:1 Gold-Dow ratio on about 5 years. Anything under 2:1 and my trigger finger will get itchy. My guess is that is that the gold-silver ratio will peak approximately at the same time that the gold-dow ratio peaks (same day in January, 1980). When that time comes, I will have to reevaluate which pm or how much of each pm to swap for land, housing, stocks, etc. I figure I have at least 5 years, so there is time for a lot of black swans/government interventions to change what I plan to do.
Just a few thoughts. (Some of these are already been touched upon above by various posters above) Reaching the 'natural' 1:15 Gold-Silver ratio is certainly on the cards going forward, however today the ratio of AVAILABLE above ground Gold to Silver is around 73 ounces of Gold to 1 ounce of Silver! Silver gets used up every day too. So today, silver is FAR more scarce than gold - and it's disappearing fast. Based upon this I expect the GSR to settle at a figure somewhat lower than the 'natural' 15:1 - probably reaching 7:1 or even less. (Remember, 7:1 only means silver is twice as expensive as silver at 15:1 - when compared to gold.) I don't think a 'doubling' of the 'relative' price is out of the question when there are 75 ounces of gold for every one silver ounce. In other words, I think silver will gradually approach (but never reach) the gold price. That being so, I also believe that until the GSR flattens out or reverses then it's best to buy only silver. Even when the GSR flattens out I'd think twice about doing a swap - as most transactions have fixed percentage overheads. You would only move to gold if you believed the GSR was about to rise again - due to increased silver availability or declining demand. Some people believe in 'diversification', and that's always wise, but gold and silver (alone) don't represent an awful lot of 'diversity'. (EXCEPT of course that gold will always excel in terms of its value density. Even at a GSR of 7:1, gold would still be 14 times more valuable per unit of *volume* than silver - since gold is roughly twice as dense as silver.) (If you could do a 'lossless' silver to gold transition at a GSR of 7:1 your chunky Eagles would shrink to the size of a sixpence - and a monster box would shrink to the size of a Big Mac!)
If silver is so rare shouldn't eventually get close in price to palladium ? Because $700 silver would be nice
Its not about the amount in stock of each, but rather the flow. You'll find that as the market heats up, there'll be less people willing to let go of gold compared to silver. Less gold will be available for sale since everyone wants it, and much much higher prices will be required to get it. The banks certainly wont be selling, assuming they have any.
I think what needs to be pointed out is that the lower the GSR gets, the more 'attention' silver we get as a monetary metal and valued investment. It's strange to note, but interest in an investment option seems to increase as prices increase, creating something of a self-fulfilling prophecy of sorts. When you can get 1 ounce of gold for 7 ounces of silver, I strongly doubt you'll see silver being referred to as the 'poor mans' gold'. In fact, it might be that event which brings out the 'silver story' anew and accelerates Silver to a platform not seen in hundreds of years. In regards to eventual parity, never say never I say. My 1oz of Gold cost me 55 ounces of silver at the 55:1 GSR mark and I'm already 15 ounces 'down' on the trade. But that doesn't mean I regret getting the gold either. In the end, hold one or the other as you please, but my end game ideal has always been about silver trading into gold except for a small Silver position (say 10%) come what may. If we get down to 10:1 or lower, you can be damn sure I'll be offloading silver into gold!
I was just thinking further on the whole GSR swapping issue. Many people are lining up for a silver to gold swap when GSR hits XX - whether that is 30 or 20 etc. If you consider that in buying silver we are buyibng at premiums then the real GSR is closer to 32-34 when premiums are considered. There is also a hit on the way out of silver so that the ratio is lower still in real terms. I would say that if you are planning on swaps, that you just hold any existing silver and buy gold right now if you are intending to swap for gold. ie. if you are intending to get gold, there is very little point in getting silver instead if your intentions were to swap at 30-32. May as well cut out the extra premium losses on the physical in and out of silver.
Good point, it's like deciding whether to upgrade your house and all the extra costs involved in sell and buy, or the alternative of just paying into your current house to renovate or upgrade it (depending on location of course). I'm new to all this and have been slowly reading through everyone's opinions, your's always seem to be sensible and worthwhile, thanks. Cathy
I'm a newbie frankly all this talk of moving to Gold on a particular GSR puzzles me. I bought gold and silver in June 2010. 10% was silver and it in real terms has out performed gold. My thinking is no matter what the GSR is I will stick with silver until the bull run ends. Is this a foolish idea? Gold in the same period has not performed and is still below what I foolishly bought it at because of the AUD/USD exchange rate. Shares have performed better.
There was a time in China where silver was more valuable than gold ... I'm enjoying reading everybody's opinions here - plenty of food for thought. It's interesting to see the two "camps" gold bugs vs silver bugs.
in Africa gold was once exchanged 1:1 with salt One reason that I personally favour gold is that at the moment I can afford it but should we get a moon shot I dare say that I won't be able to whereas I could afford silver as well. Lets say the GSR halves. One could still buy in and profit from the exchange. Of the two metals I'd say that Silver has the most potential but Gold is still the "sure thing" (if such a thing exists that is)
