... but the overall trend is down, isn't ? Even so, I don't think we can compare the 2 PMs as they have different uses, storage & volume restrictions. I won't be sell selling all my gold to get into a single minded view of perspective gain, it's too narrow thinking for my likings.
Not really. The GSR is one way strategy to accumulate a stack. I read a while ago (but can't give appropriate credit) (paraphrased) Gold or Silver will both pay off, just one is going to pay off far more. So in essence Gold vs Silver Bug isn't two diametrically separate philosophies. It's two members of the same family agreeing in the destination and mode of transport but disagree what route to take. Man my analogies suck but you get the idea
Silver return is higher cos the risk is higher. If you speculate it is an interesting play but if you just want to preserve wealth, ratios mean little really.
Silver return is higher because it was manipulated harder and longer. Fundamentally most things that Gold can do, Silver can do as well. Natural ratio by weight is around 8-12 : 1 and due to Golds higher density the ratio by volume would be from 4.5 - 6 :1 So why should Gold cost more than 20:1 ???
If the natural weight ratio is 8-12 : 1 and gold is denser, then the volume ratio will be greater still (ie: 16-20 : 1) rather than lesser. Correct?
Wrote a post on this a while back but can't find it. If the GSR ever stabilises at around 12-16:1, it will be entirely coincidental to any suggested "natural occurrence" GSR of 15:1. Gold is a capital reserve metal with a long monetary history with the potential to become backing for a future currency, in what's likely to be a manipulated market. Silver is a consumed industrial metal with speculative investment demand that's not likely to become backing for a future currency, in a highly manipulated market. Totally different demand aspects, and none are in relation to the comparative rarity. If rarity alone set prices, then why aren't we all piling into platinum? Annual production is about 6% of the annual gold production, and it has industrial applications to boot. You simply can't just say "gold is 15 times rarer than silver, so 15oz silver is worth 1oz gold".
Thanks gp for saying what I was thinking. Gold bugs are only losing silver purchasing power when the ratio tightens, not money. Silver is not the store of wealth that gold is. You guys think the shit will hit the fan tomorrow, the usd will collapse and hyperinflation. But people have been saying that for years. These metals have had their functions for thousands of years, don't be so ignorant to think the 'game' is going to change in our piddly 80 year lifespan.
Oh I'm not saying there's an argument against the GSR hitting 15 again - I'm just saying that it's not as simplistic as comparing the relative rarity of the two metals. The ratio will hit 15 because of other factors. I'll tell you what though, if the GSR did hit 15 or lower, I still have a big fat pile of silver
Only for the gold holders in the country with the gold standard - it's unlikely that floating exchange rates would disappear at the same time. Probably even more important for people in countries that weren't pegged to the gold standard currency of another to be buying gold - e.g. if the US went to a gold standard and stabilised their currency (ha!), and Australian dollars remained "floated", gold would still function for us in Australia as an inflation hedge. It would be a constant price in USD, but should the AUD tank, holders of gold here would be laughing. Conversely, if the AUD rocketed, gold holders would be burned.
I don't really believe in coincidences .... especially not one that has such a long history as the GSR ratio over thousands of years. The only real exception has been since the silver price has been manipulated down - and thats been a piddly little period on the radar. Me thinks the historic GSR closely tracking the physical ratio of the natural occurence of the two metals is no coincidence.
It is a coincidence. Economics 101 shows that supply is only one determinant of the market force. Anyway, the 15 times more silver than gold number is a load of crap. Every study comes to a different number- I have read articles saying that silver is more scarce than gold and other articles saying the ratio is 20+:1
Indeed, supply is only one determinant of price - the other is demand. Not sure what your point is though as supply will still be a direct (proportional) determinant of price. I certainly dont see demand slacking off for silver (or gold). I think you're misunderstanding the ratios aspect there. The ratio of silver:gold occurence is usually in the context of their occurence under the ground (i.e. the natural source yet to be mined). When it is said that silver is more scarce than gold, the reference there is to the above-ground levels - i.e.the metals that have already been mined. Every credible source of information on precious metals i've ever come across has always touted the natural occurring ratio of silver:gold as the main driving force behind the historically established GSR ratio ... But if you reckon its a coincidence i wont question it
Yawn, gotta love condescension... Youve said it yourself that supply is only one factor affecting price. So why would the gold/silver ratio equal the apparent abundance of the respective metals? To say that abundance determines the ratio would ignore demand, cost of retrieval, usage rates etc.
My emphasis. Historical GSR is exactly that - historical, set when both metals were monetary in nature. If you haven't done so, research Sir Isaac Newton's involvement in setting the historical GSR when he made recommendations for the revaluation of gold and silver in relationship to each other - partly driven by an effort to manipulate the price of silver to stop it flowing out the mint, down to the docks and off to the far east where it was still the primary monetary metal. Blatant plug - read http://forums.silverstackers.com/topic-5061-gold-the-once-and-future-money.html Apart from that, the historical GSR can easily be attributed to the relative rarity, as there was basically the same demand dynamics. Today, the demand dynamics are totally different - no-one is seriously suggesting the return to a bimetallic standard (they never worked historically), gold is still the primary reserve metal today, silver is primarily industrial/investor speculation. New dynamics, different demands, any return to 15 (we're still miles away at 38, which is a 30 year historic low) will be coincidence driven by different reasons to "relative rarity". Many internet commentators however cling to the notion of the "natural" GSR of 15 or 16 being "correct". If the world does return to a gold standard, basically a GSR of 15 is price-fixing on an global scale with no recognition of shrinking supplies and increasing utilisation. Many silver bulls feel that there is the possibility that the GSR could go lower than 15 (if peak silver does eventuate). I'm not arguing for or against the GSR hitting 15 - just arguing against one commonly purported reason.
Paper bulls are scared of Gold and Silver Gold bulls are scared of Silver ( especially those who have been playing the GSR and are 'surprised' that the GSR is below 40 )
What gold bulls are surprise by the tightening ratio? I haven't read anything of that nature? Gold bulls should appreciate the role of silver. Any evidence, articles, references??
