Gold or Silver or Both?

[Emanance]

I've finally got our SMSF set up, and hoping mine & my wife's rollover cheques arrive real soon while the prices of both Gold & Silver are so favorable. The big question is do we go Gold, Silver, or Both?

I think ultimately we will settle on a percentage between to two. Looking over the last 10 years the Gold to Silver Ratio at 58:1 is just right now at to justify a 50/50 split between to two.

But just thinking out loud and considering all the talk of the Basel III Accords roll out starting in 2013 with abolition of Tier 3 Capital and the (supposed) reclassification of Gold as Tier 1 Capital, one would think that gold will see a sharp jump in its spot price once (and if) this is confirmed. If this Tier 1 reclassification of Gold proves to be correct, we would be silly not to position ourselves 100% (or at least go 80/20) in gold and capitalisze on golds theoretical climb away from silver in the short term shortly before the fiat currency bubble finally (explodes) bursts.

But this talk of fiat currency collapse brings me to Poor mans Gold (Silver). Unlike Gold, Silver is nearly half it's historical record price, And in any hyper inflationary fiat currency collapse scenario, it would have no option but to skyrocket and close the gap between itself and gold. Gold's price will simply be too inaccessible to the majority of people in the short term early days of a fiat currency collapse, so silver will be the only viable alternative. Although I believe silvers cheaper price advantage over gold will be short term due to shortages created by decades of Silver's industrial use and it's extremely low recovery rate from recycling (only 16%). In fact I've read that at this point in time there is more gold in refined usable form on the planet right now than silver. Theoretically this could lead to a 1:1 Gold to Silver Ratio! In this scenario you would kick yourself if you hadn't position yourself with a higher percentage in silver.

I guess with the right timing around global events, one could easily switch in and out between to two metals, and do quite well by closely watching the GSR.

But if you could snap your fingers and invest say $25,000 in Gold or Silver or Both, would you go all in with one metal over the other, or a ratio, and what would that ratio be?

 

[Guest]

I'd go all silver personally. You can't go wrong with either or both though.

[youtube]http://www.youtube.com/watch?v=AOGhRYSvOUY[/youtube]

 

[thatguy]

gold for safety, silver if you like a punt

 

[CriticalSilver]

Congratulations, you've just done a great thing for your personal wealth preservation in opening a SMSF. Now you're about to take the next big step and begin investing. Considering asset allocations is an important part of defining your investment strategy, and precious metals are an important asset class for long term preservation of purchasing-power/value.

For the reasons you list and more, many people choose to hold both physical Gold and Silver in an allocation to PMs. Some have a ratio by weight, some go by an even value distribution. I don't think there is a right or wrong approach, you just need to make decisions that suit your circumstances.

But don't forget to consider the form to hold, storage costs and risks.

Gold on hand is a very portable and condensed form of wealth, while silver is less so historically.

At $25k, I would consider a monster box of silver billion coins and the rest in gold coins and then top up with gold over time. But that's not advice, you have to make those decisions yourself.

 

[goldpelican]

What's your risk appetite and stomach for paper losses of capital like?

http://forums.silverstackers.com/topic-19734-gold-and-silver-prices-2011-update.html

 

[Contrarian]

I've decided to go 100% gold for the PM allocation of my SMSF.

If I want to speculate I buy silver. (I currently own none)

For my SMSF I'm not interested in speculating I want the protection and stability of gold.

C

 

[Kawa]

If your whole capacity in the SMSF is 25K I would seriously caution about putting it all in PM.I personally think you are just punting rather than investing.

Many on here say the sharemarket is terrible because it's controlled and the aliens own the banks with JP Morgan however many look to silver ( a pretty volatile PM) as some safer alternative???

Go figure.

The ASX in certain areas is exceptional buying.The major banks are essentially paying near 10% return each year with fully franked credits.People have to eat and we have Wesfarmers that can assist there as well as some hardware stores to boot.

BHP is so cheap at present.Think Origin for gas?

IMO I would "punt" 5K in Silver maybe and put 3K into each of the Big Four Banks and the rest into Wesfarmers , BHP and Origin.

Will be interesting to cut and paste the above and compare to a pure PM position in 12 months?

 

[Kawa]

I've decided to go 100% gold for the PM allocation of my SMSF.

If I want to speculate I buy silver. (I currently own none)

For my SMSF I'm not interested in speculating I want the protection and stability of gold.

C

Would you be prepared to say what % of the SMSF you have in PM's?

 

[Contrarian]

I've decided to go 100% gold for the PM allocation of my SMSF.

If I want to speculate I buy silver. (I currently own none)

For my SMSF I'm not interested in speculating I want the protection and stability of gold.

C

Would you be prepared to say what % of the SMSF you have in PM's?

Currently 20% PM, 50% fixed interest, 30% high yeilding blue chip shares such as the ones you mention.


C

 

[Kawa]

I've decided to go 100% gold for the PM allocation of my SMSF.

If I want to speculate I buy silver. (I currently own none)

For my SMSF I'm not interested in speculating I want the protection and stability of gold.

C

Would you be prepared to say what % of the SMSF you have in PM's?

Currently 20% PM, 50% fixed interest, 30% high yeilding blue chip shares such as the ones you mention.


C

Thanks.With Fixed Interest .Do you stagger expiry's of deposits and what term do you lock in?

It maybe a little off topic so apoolgies to Emanance however would be good info me thinks?

 

[Contrarian]

Would you be prepared to say what % of the SMSF you have in PM's?

Currently 20% PM, 50% fixed interest, 30% high yeilding blue chip shares such as the ones you mention.


C

Thanks.With Fixed Interest .Do you stagger expiry's of deposits and what term do you lock in?

It maybe a little off topic so apoolgies to Emanance however would be good info me thinks?

Fixed interest is split in half. One for 12 months the other two years.

Probably wont add any more to PM's or fixed interest. Will keep adding to the shares on the dips.

C

 

[LovingtheSilver]

Well, if there is a strong feeling of another crash around the place, cash and maybe gold would be the best at the moment. Gold will come down also but not as bad as silver. I dont have a SMSF but my current breakdown is 40% gold, 40% cash and 20% silver/plat. Not following any formula, thats just the way it has ended up. Still have nothing in property unfortunately, that is what my cash component is for when i think the time is right to purchase a property. Income now is mainly for gold and cash (adding to property fund, plus cash for shares).

 

[Ilikemetals]

A very Bearish comment I found regarding silver vs gold. What you think?

FOFOA: What if scarcity doesn't matter in a monetary metal? What if STABILITY is infinitely more important than scarcity? What if the "stocks to flow ratio" matters infinitely more than scarcity? What if the gold stock to flow ratio at today's prices is more than 175 times greater than silver?

What if silver's wonderful history as a monetarily important part of "bimetallism" ended more than a century ago? Can you show me a politician or central banker that has said anything about silver lately? Was there ever a "London Silver Pool?" How about a WAS/CBSA (Washington Agreement on Silver/Central Bank Silver Agreement)? When was the last "silver standard?"

The $IMFS loves that silver is associated with gold! It "commoditizes" gold. It takes much attention away from "gold-the-wealth" and puts it on "precious metals."

But there are so many would-be gold bugs with no savings that want to participate in the gold revaluation that don't understand. And they still see the silver price rising with the gold they can't reach.

So they are convinced that silver will outperform gold, and so don't touch the yellow wealth metal. They speculate! Exactly what the $IMFS wants them to do.

You want to use silver as a call option on gold? Go for it. But then you are an active trader. You must be alert and prepared to take a loss and live with regrets.

I know all the standard arguments for silver. So save your effort. I spent a year studying them while I was accumulating silver.

"There is less silver than gold." Makes it a worse monetary metal at this point. Less stability.

"Historic 16:1 ratio." Good luck with that one. Bimetallism was officially abandoned more than 100 years ago.

"More industrial demand for silver." Uh-huh. Yup, it's a commodity metal now, and susceptible to economic forces.

"TPTB don't have any to suppress the market." Uh-huh. Yup, and they don't have any reason to bother supporting a revaluation when the dollar collapses either. In fact, they have an incentive to do the opposite! To support a WIDENING of the GSR so that industry doesn't suffer.

"Gold's too expensive." Then you don't understand money.

"You get more silver than you get gold." Yeah, you get more iron scrap too.

Puh-leeeeze. Don't come hit me with these tired arguments. I will not respond. I probably left out a few too.

If you feel better buying silver than gold, then just go for it. It won't affect Freegold in the least. I won't hold it against you!! It will help it in fact. Just like dumping your dollars for wheat or oil will help speed the process.

 

[thatguy]

"TPTB don't have any to suppress the market." Uh-huh. Yup, and they don't have any reason to bother supporting a revaluation when the dollar collapses either. In fact, they have an incentive to do the opposite! To support a WIDENING of the GSR so that industry doesn't suffer.

So silver is not manipulated??

 

[Emanance]

Ilikemetals, your post makes some great points. Until I read it I had never heard of a "stocks to flow ratio". I just read a great little primer about it here: http://www.goldstandardinstitute.net/2011/07/stock-to-flow-ratio-a-primer/ . This is something I had considered in the past about a return to a bimetal standard. It raises the ultimate question: What valid industrial metal alternatives are there to silvers industrial applications other than gold.
From the comments you posted, I imagine you are banking on the day for a return to a gold standard. However even in this event, wouldn't silvers volatility based on it's "stocks to flow ratio" mean it would also enjoy price spikes that would match golds, as industrial suppliers are forced to switch back and forth between the two metals simply as a cost saving exercise? I understand both gold and silver are the only two metals that behave near the electrical resistivity and conductivity range of a semi conductor at room temperature. This eliminates the addition of expensive and bulky heat management systems in products like mobile phones and laptops.

 

[Emanance]

If your whole capacity in the SMSF is 25K I would seriously caution about putting it all in PM.I personally think you are just punting rather than investing.

Many on here say the sharemarket is terrible because it's controlled and the aliens own the banks with JP Morgan however many look to silver ( a pretty volatile PM) as some safer alternative???

Go figure.

The ASX in certain areas is exceptional buying.The major banks are essentially paying near 10% return each year with fully franked credits.People have to eat and we have Wesfarmers that can assist there as well as some hardware stores to boot.

BHP is so cheap at present.Think Origin for gas?

IMO I would "punt" 5K in Silver maybe and put 3K into each of the Big Four Banks and the rest into Wesfarmers , BHP and Origin.

Will be interesting to cut and paste the above and compare to a pure PM position in 12 months?

Fully franked credits hey, reading up on this one, very interesting.

But what would happen Kawa, to the Big 4 Australian banks and any share therein if the USD and The EURO both go into fiat meltdown?

 

[Emanance]

Aren't all modern national fiat currencies ultimately pegged to the USD? This couldn't bode well for any business that peddles currency such as modern banks.

 

[Kawa]

If your whole capacity in the SMSF is 25K I would seriously caution about putting it all in PM.I personally think you are just punting rather than investing.

Many on here say the sharemarket is terrible because it's controlled and the aliens own the banks with JP Morgan however many look to silver ( a pretty volatile PM) as some safer alternative???

Go figure.

The ASX in certain areas is exceptional buying.The major banks are essentially paying near 10% return each year with fully franked credits.People have to eat and we have Wesfarmers that can assist there as well as some hardware stores to boot.

BHP is so cheap at present.Think Origin for gas?

IMO I would "punt" 5K in Silver maybe and put 3K into each of the Big Four Banks and the rest into Wesfarmers , BHP and Origin.

Will be interesting to cut and paste the above and compare to a pure PM position in 12 months?

Fully franked credits hey, reading up on this one, very interesting.

But what would happen Kawa, to the Big 4 Australian banks and any share therein if the USD and The EURO both go into fiat meltdown?

What say if Silver goes to $12?

 

[Black_Sun]

"Gold's too expensive." Then you don't understand money.

In 1980, when gold was nearing its peak, a lot of prospective buyers said, "Gold's too expensive." And alot of smug newsletter writers used to say of these people, "They don't understand money." So... when Jim Sinclair started selling his gold, at the same time others were being admonished for not buying (cause they thought it was "too expensive"), does this mean that Jim Sinclair didn't understand gold?

 

[Emanance]

What say if Silver goes to $12?

True that would be sad for someone sitting on 1000 ounces of silver. But really with all the financial instability that is the backdrop to these decisions, I would be more worried about banking shares going to zero. As you look across the European economic landscape it is only Iceland, that let it's major banks go bankrupt 3 years ago, that is now experiencing a recovery out of all the other PIIGS nations.
Don't get me wrong, I respect your suggestion and opinion, and If I could safely invest in shares that pay a dividend, that would be a great way to generate a return that I could reinvest into more dividend generating shares or even buy more bullion. But it seems to me that a slow motion financial meltdown is damn near unavoidable in the northern hemisphere at this point in time. So Wouldn't it be wiser to backstop things first with solid foundation of gold & silver?