Practical guide to GSR Trading

Discussion in 'Silver' started by valuecreator, Sep 24, 2019.

  1. valuecreator

    valuecreator Well-Known Member Silver Stacker

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    This is a chapter of an ebook I published in January (available here).

    I'm sharing this here for the few that don't know about GSR trading already, or don't do it.

    This is by far the best way to acculate wealth safely without leverage. (and btw, a mortgage is still leverage!).

    I've put the table of content at the end because a few members on this forum asked for it.

    enjoy!


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    Last edited: Sep 26, 2019
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  2. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    Mathematically correct, but in reality you need to factor in a sell/buy spread which can limit your return. The way around this is to have bought the majority of your stack on the secondary market during the dips and sell on the highs. Also you would need to stick to generic bullion to avoid any numismatic premiums. Finally, you need to trade regularly in order to be in the loop so that you can act quickly and efficiently.
     
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  3. ozcopper

    ozcopper Administrator Staff Member

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    I bought the book. Was a good read.
     
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  4. Jislizard

    Jislizard Well-Known Member Silver Stacker

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    I am currently set up for GSR swaps in my SMSF so I have a rough grasp of the concept, but as soon as I saw your "…I have 5oz gold bought at GSR 50 and 50oz silver bought at GSR 70…" my eyes just glazed over.

    I immediately thought of ..."If Train A is travelling North to Station X at 50 MPH and Train B is travelling South to station Y at 70 MPH..."and that is when I stopped reading any further.

    I tried to explain the concept to my wife and the only way I could do it was to tell her to imagine we were going on holiday overseas and we had to change our currency for the foreign one. And then when we came back the exchange rate had changed and we could swap the unused currency back at a different rate. Fortunately her eyes also glazed over and we have never had to have the discussion again.

    I am currently only using unallocated metal holdings to perform the swaps and have been swapping allocations of gold until I am now all out of gold and have everything in silver.

    There was a premium when you bought unallocated silver (looks like it is no longer offered but it sounds a lot like pooled allocated), which you would loose when you sold it back to the dealer and you would pay the gold premium when you bought from the same dealer. So premiums did come into it, pretty sure there was a small charge for performing the GSR swap as well but it wasn't much. Also as the GSR was never an exact whole number I usually ended up buying a bit more silver to round it up into whole numbers. At least I didn't pay any postage fees and I wasn't concerned about being ripped off. It is not a fast process though, took a couple of days last time for my email request to be acknowledged and acted upon manually, so not great for really quick spikes.

    It would be nice to find a sweet spot where it becomes worth it to trade smaller volumes over smaller GSR changes but currently I am not looking to swap anything until the GSR gets back down to 45.
     
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  5. sammy

    sammy Active Member Silver Stacker

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    ... and you need to factor in Capital Gains Tax too.
     
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  6. valuecreator

    valuecreator Well-Known Member Silver Stacker

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    thanks for the feedback guys. :)

    For having done it for almost 10 years, I can vouch that GSR trading is not only mathematically correct, but very very effective in real life.

    yes the gsr explained above uses spot price. I personnally use Real GSR (rgsr) to trade, that accounts for premiums, postage and insurances cost on either buy or sell. Maybe I should have mentioned that in the book but wanted to keep it simple (kind of...).

    As far as taxes are concerned, this is a subject I never discuss in public except to quote Einstein: “This is a question too difficult for a mathematician. It should be asked of a philosopher" (when asked about completing his income tax form).

    GSR trading is for people that use gold as an insurance policy, not as a way to do a ten bagger in paper currency.

    I also use a GSR-like strategy with bitcoin/ripple and bitcoin/ethereum for a crypto exposure as well as oil/gold and s&p500/gold.

    But look at it this way: if my 13 year old can do it, anybody here can too! ;)
     
    Last edited: Sep 24, 2019
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  7. kilo

    kilo Active Member Silver Stacker

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    BUZZ

    PM Sent
     
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  8. Jislizard

    Jislizard Well-Known Member Silver Stacker

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    I also had a modified GSR on my spreadsheet which took into account the premiums and fees, it made for a more accurate exchange. I probably need to amend them to reflect the current fees but it will be a while until it gets back to 45.

    And having the GSR Swaps within my Self Managed Super Fund there was Capital Gains Tax on the sale of the gold, they wouldn't accept that it was a straight swap of one metal for another of the exact same value.

    I did one GSR swap with physical metals outside of super, swapping out a load of 50% predec for some pure gold coins. It was a a couple of kilos of silver coins for an envelope containing three of the smallest coins I have ever held. My postage fees were far higher than the gold sellers and my coins were at 0% premium while I paid the premium for the 1/4oz Maples, but it was a great first attempt and I wasn't interested in the actual GSR, it was an alchemy experiment to see if I could turn silver and base metal into gold.
     
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  9. valuecreator

    valuecreator Well-Known Member Silver Stacker

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    I use services like (but not exclusively) goldmoney.com and bullionstar.com. please do your own due diligence, this is not a recommendation.
     
    Last edited: Sep 25, 2019
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  10. swoydaz

    swoydaz Well-Known Member Silver Stacker

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    Postage and handling might be taken into account.
     
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  11. SilverDJ

    SilverDJ Well-Known Member

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    Exactly, the whole thing can easily fall apart or return nothing if you buy and sell at the wrong time. Silver has been known to move +/- 5% in a day or two, so missing your timing by just a day or two can wipe out a years worth of gains.
    Remember, the GSR does not mean that because gold goes up, silver drops, or vice versa. Either metal can move in price without the other moving, or by a lesser percentage.
     
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  12. valuecreator

    valuecreator Well-Known Member Silver Stacker

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    hi silverdj, I remember you. with all due respect, I don't think you understand GSR swapping at all and your post above demonstrate this. To you it's just theory, to me it's real life practice. You have to understand that I'm never predicting any move. I just react accordingly when there's one and accept gratefully any yield I get given. I let compounding interest do the rest.

    saying that "so missing your timing by just a day or two can wipe out a years worth of gains." is so ignorant, I just have to smile.

    your metal is still there, your financial bodyguard is still doing his job. you can't lose, it's a win-win.

    like i said, it's just not for the toilet paper profit chasers, which I think created your confusion. I care about the price of gold in $ about as much as the price of gold in Zimbabwe dollars 10 years ago.

    I care about the price of gold in silver oz. The job of my stack of gold and silver is to make babies. more oz, always. not more toilet paper.

    It's just too bad I can't share my figures because that would open some eyes. (or maybe get attacked as a fraud, how so predictable).

    I know for a fact that a lot high net worth family offices use the same mechanism to accumulate wealth for generations, but using different asset classes.

    not my intention to start a fight here. I want to plant a seed so that maybe one day a newbie finds this thread and makes an effort to understand the concept and use it for himself.
     
    Last edited: Sep 29, 2019
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  13. 66rounds

    66rounds Well-Known Member Silver Stacker

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    How would you suggest a recent stacker to start off? I have roughly 10oz of gold and nil silver.
     
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  14. valuecreator

    valuecreator Well-Known Member Silver Stacker

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    start by playing with it. do paper trading for the first 6 months or until you get used to it.

    be clear why you're doing this in the first place. Is it to get richer in dollars or in bullion?

    break down your oz in grams. shadow the prices for unalocated of a big bullion company. use the real cost (premium and other fees), that will eat slighthly into your profits but its ok.

    decide if you gonna swap every 10 points, 5 points, 2 points, 1 points of gsr?

    you hear all the time stackers saying "I'm waiting until it gets to 45 to swap my silver to gold".

    gsr is 85 this morning. it could easily go in a trading range between 60 and 80 for the next 5 years!

    what you do is: let's say you swap some metal every 5 points.

    don't try to predict where next. just know how you'll react if it goes up, if it goes down, if sideways.

    A bot could easily do this and in fact is doing it for me in cryptos.

    keep a core position, say 30% to 40% gold that you'll never swap.

    so with 10oz gold, I would hide 3oz and not touch it.

    you have 7oz left to play with. I would sell 5.25oz and buy silver with it. (75% of the gold. that because we are in the upper limits of the gsr historically. can it go higher? yes. that why we still have gold to swap. but what if gsr goes to 150 or 200? we'll in that case I would sell everything I own in life and buy silver and change my name for mr. Money Bags. but I digress.).

    now you have around 446oz of silver (bought at gsr85, always make note of that)

    if the gsr goes up five points, sell more gold and buy more silver.

    if the gsr goes down to 80-ish or lower, sell some silver and buy some gold.

    but not too much! remember, it's a long way to 1 to 1 ratio! ;)

    you don't want to run out of powder.

    and you keep doing this on and on and on.

    it's very boring but i like boring when investing.
     
    Last edited: Sep 30, 2019
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