Opposite View of Precious Metal Bugs.

[SpacePete]

Technical usage:

* Gambling: introduces risk where none exists.
* Speculation: taking on existing risk (in expectation of substantial gain)
* Insurance: mitigates risk where risk exists.

simply...

* If I flip you a coin for your stack, I am gambling.
* If I buy silver expecting it will go to the moon, it is speculating.
* If I add silver to my portfolio as protection against the risk of a potential financial crisis, it is insurance.

IMO, the assumption that silver will provide the risk mitigation or protection you assume is the speculation.

In the above definition, speculation involves the expectation of substantial gain, whereas mitigation against the risk of potential loss without expectation of gain is insurance.

Whether silver would in some future financial crisis deliver on the expectation is an assumption, like all insurance. There is always counterparty risk, but precious metals have been called the ultimate insurance because it has been claimed they eliminate counterparty risk.

 

[Cheepo]

Thank you for these historical prices of gold and silver. Very interesting. So the relationship kept, until they went into the billions or trillions. Actually since it was a 1:16 relationship for a long time, and then suddenly it became 1:160 I also wonder if there isn't a mistake in the original source. Anyway, it's very interesting, and one more reason to buy silver rather than gold.

 

[Jislizard]

Thank you for these historical prices of gold and silver. Very interesting. So the relationship kept, until they went into the billions or trillions. Actually since it was a 1:16 relationship for a long time, and then suddenly it became 1:160 I also wonder if there isn't a mistake in the original source. Anyway, it's very interesting, and one more reason to buy silver rather than gold.

It could be a mistake in the original, all it would take is one zero to come off the gold price and then you have the 1:16 ratio restored, which would be more likely than a leap so large.

 

[The Crow]

It might be worthwhile, in the discussion about insurance, to think about where the concept is supposed to have started.
The story goes that it began with boat 'captains" (or whatever you might have called them) transporting goods down the Yellow River (or some such river in China) where the were some highly risky falls/rapids/other water hazard. Prior to travelling through that part of the river, 10 boats would get together and swap their cargo around so that each boat carried only 1/10 of it's original cargo and each other boat's cargo. If any one boat went down, 1/10 of each boat's cargo was lost, but 9/10's preserved. (If someone remembers the story better they might provide a link).
Hence insurance wasn't (isn't?) about preventing loss, but "mitigating" loss, i.e. "spreading the risk" in the true sense of the word.