Silver Gold Ratio

[JadeDragon]

I never really got the whole Silver Gold ratio thing until watching this simple video.

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He likes 50:1 to move from Silver into Gold. It looks like the current ratio is about 85:1. I've always figured owning some of both was the answer. Thoughts?

[Saabman]

The last time it was 50:1 was around October of 2011. Might be a long wait to get it back down that low?

[coppernickel]

I think a good mix is best. The pendulum has been toward silver for a long time.

I think history will right the ratio somewhere near 10:1, but we may see Armageddon before it happens.

[Cu Penny Hoarder]

I know a guy who trades the G:S ratio in size. Last November when silver dipped briefly in the $13's, he backed up the truck and traded ALL his gold for silver... about 70K ounces. He does this every time the ratio skews to one side or the other. He never takes the cash, just keeps trading the PM ratio and adding more PM to his stash. Of course, you have to know a PM dealer who can accommodate this type of trade. Most LCSs are not capable of trading in this size.

Right now silver has the biggest upside potential. Gold is a bit more stable and not as susceptible to large % price drops like silver is.

Buying/owning silver is the biggest no brainer in history. All you need after that is patience. I hope it drops back to $14.00... I've accumulated too many green rectangles in my safe.

[IdahoCopper]

My LCS demands his percentage on both sides of a G/S swap. He figures it like: gold to dollars, pay his cut; then dollars to silver, pay his cut.

Screw that.

[Cu Penny Hoarder]

My LCS demands his percentage on both sides of a G/S swap. He figures it like: gold to dollars, pay his cut; then dollars to silver, pay his cut.

Screw that.

Depends on the size of the trade. I can understand the LCS shaving some off the top to cover volatility, but your guy is taking too much. Plenty of others out there to deal with who will charge you less. You'll probably have to travel some distance to find them.

[InfleXion]

I never really got the whole Silver Gold ratio thing until watching this simple video.

He likes 50:1 to move from Silver into Gold. It looks like the current ratio is about 85:1. I've always figured owning some of both was the answer. Thoughts?

IMO playing the GSR is the sort of thing you do only a handful of times in your lifetime at key peaks and valleys. The more you do it, the more you stand to lose in transaction fees, and the more chance you have of picking a sub-optimal spot.

I used to think that I'd play the GSR, and maybe someday I will if silver ever normalizes (10:1 would be a more apt ratio based on mining output), but at the end of the day as long as I can trade fiat currency for sound money I'm happy. If the GSR is high, buy silver, if it's low, buy gold. You don't even have to part with any metal to take advantage.

Since we've never seen historical norms in my lifetime, I have always been heavy on silver, but the portability of gold keeps it on my radar regardless.

[JadeDragon]

That makes sense. I'm a buy and hold kind of person. I've traded some coins for poured bars from Market Harmony but I even regret that. Should have just bought. Mind you gold and silver don't earn income or go up and up at the rate of Birkshire Hathaway shares but it is a solid tangible long term wealth kind of base, part of a strategy that includes income producing real estate and some quality equity investments.

[InfleXion]

Ironically Warren Buffet's father was quite the gold bug, so his disdain toward gold isn't for lack of education. He is of course correct that it isn't income producing. It's so you can protect what you've earned with minimal risk. For me it's part of a broad diversification plan, and of course depends on how much wealth you have to preserve. The thing that drew me to precious metals above all else was that they are tangible and intrinsically valuable, and don't require any authority, power structure, or service provider to maintain their value, function, or liquidity.

[JadeDragon]

Buffett has gone into Silver for unknown reasons. Not sure he still owns silver. He like gold a lot but does not buy it. He makes an interesting point about being able to touch and caress your gold but unlike say farmland or stock or a business it never earns anything. Search on Youtube for Gold Warren Buffett if you have not seen it. Balance in everything.

[Cu Penny Hoarder]

Buffett has gone into Silver for unknown reasons. Not sure he still owns silver. He like gold a lot but does not buy it. He makes an interesting point about being able to touch and caress your gold but unlike say farmland or stock or a business it never earns anything. Search on Youtube for Gold Warren Buffett if you have not seen it. Balance in everything.

He bought several million ounces of silver in the 90's. TPTB made him sell it. Rumor has it that silver became the SLV.

The way Buffet (and Munger) disparage gold makes me want to punch him. I'll bet he wish he had some gold in late 2008. Hypocritical a-hole!

[Recyclersteve]

He is of course correct that it isn't income producing.

Gold and silver CAN BE income producing. If you used the stock market to buy exchange traded funds such as GLD (gold) and SLV (silver), you could then sell covered calls (options) against them to produce income. These could be calls that expire monthly or even annually if you prefer.

BUT there are risks to doing this, so don't get seduced by the idea of gold and silver as income producing investments. A few of the risks:

1) What if there isn't enough gold and silver in the vaults to back the investments you have made? Once this is discovered, the value of your investment could plummet at the exact same time as the spot price of the metals is skyrocketing. A little mind bending as a concept, but think hard about that and you should agree with me.
2) What if you sell a covered call hoping to not get called away and you end up getting called away? You would then have a taxable event, but could either buy back the calls at a loss (ugly situation and still a tax offsetting event). Or you could have IRA's for the purpose of owning gold and silver.

All that said, I don't trust anyone (even and especially large banks) to hold my precious metals. I want them stored in a safe location where I can get to them when I want/need to.

[Recyclersteve]

Another point about the Gold/Silver Ratio. There is a book that I highly recommend about this. It is called Making Inflation Pay by Jonathan Hefferlin. He was a very well known coin dealer in Southern California back in the 1970's/1980's. His shop was pretty close to the LAX airport.

Hefferlin traded gold and silver against each other a lot and ended up becoming a millionaire by doing so. This was back when becoming a millionaire meant a lot more than it does now.

Hefferlin was quite a character. Here are just a few tidbits from the book to whet your appetite.

ADOPTIONS: He adopted something like 20 kids. He got such a reputation for doing this that there were kids that even slept on his doorstep hoping to be adopted. He'd adopt them and put them to work sweeping floors and keeping the place clean.

LADIES' HOSIERY: There was a company which made ladies' hosiery and went bankrupt back in the day. I think this might have been L'eggs (the one that stored it's product in what appeared to be a colorful eggshell). At a bankruptcy sale of some kind he bought something like 10,000 pairs of this product, having no idea how or when he'd ever sell it. Yet he ended up doing just fine on the transaction.

There are lots of interesting war stories in the book. He also spells out his complete track record showing when he traded gold for silver and vice versa. This is a fun-to-read, inspirational and highly recommended book. You should be able to get a copy pretty easily on eBay, Amazon or elsewhere.

[Recyclersteve]

Buffett has gone into Silver for unknown reasons. Not sure he still owns silver. He like gold a lot but does not buy it. He makes an interesting point about being able to touch and caress your gold but unlike say farmland or stock or a business it never earns anything. Search on Youtube for Gold Warren Buffett if you have not seen it. Balance in everything.

TPTB made him sell it. Rumor has it that silver became the SLV.

I'd heard/read that Berkshire Hathaway sold covered calls against his physical silver holdings. This was in essence betting that silver would not have a big move up in the short term. The buyer of most/all of those calls was none other than insurance giant AIG. When silver did spike before the expiration of the call options Berkshire in essence transferred it's silver holdings to AIG.

Yes, that is the same AIG that came out on 9/15/08 (the same day that Lehman Bros. famously declared bankruptcy) and demanded that the federal government give them a $100 billion bailout or they too would go bankrupt. I understand the amount of the actual bailout was over $150 billion.

[Cu Penny Hoarder]

Yes, that is the same AIG that came out on 9/15/08 (the same day that Lehman Bros. famously declared bankruptcy) and demanded that the federal government give them a $100 billion bailout or they too would go bankrupt. I understand the amount of the actual bailout was over $150 billion.

That was just for AIG, who really should not even exist now. Actually there was $500 billion dollars given to foreign banks in order to prop up the entire global financial system.

Watch...
https://www.youtube.com/watch?v=_jjXCm3W4hA

[InfleXion]

Yes, that is the same AIG that came out on 9/15/08 (the same day that Lehman Bros. famously declared bankruptcy) and demanded that the federal government give them a $100 billion bailout or they too would go bankrupt. I understand the amount of the actual bailout was over $150 billion.

That was just for AIG, who really should not even exist now. Actually there was $500 billion dollars given to foreign banks in order to prop up the entire global financial system.

Watch...
https://www.youtube.com/watch?v=_jjXCm3W4hA

As I recall a GAO audit years later showed the 2008 bailout was over $16 trillion. TARP at $700 billion was paid back to the tax payers, but that bigger number was from the Fed to their primary dealers directly (unclear if this includes the foreign banks or not). Instead of having to pay back the tax payers, we shoulder the burden of inflation and less buying power. Incidentally the dollar is still very strong since a lot of those dollars are out of the country due to the oil trade, and other currencies are in even worse shape.

[Cu Penny Hoarder]

Yes, that is the same AIG that came out on 9/15/08 (the same day that Lehman Bros. famously declared bankruptcy) and demanded that the federal government give them a $100 billion bailout or they too would go bankrupt. I understand the amount of the actual bailout was over $150 billion.

That was just for AIG, who really should not even exist now. Actually there was $500 billion dollars given to foreign banks in order to prop up the entire global financial system.

Watch...
https://www.youtube.com/watch?v=_jjXCm3W4hA

As I recall a GAO audit years later showed the 2008 bailout was over $16 trillion. TARP at $700 billion was paid back to the tax payers, but that bigger number was from the Fed to their primary dealers directly (unclear if this includes the foreign banks or not). Instead of having to pay back the tax payers, we shoulder the burden of inflation and less buying power. Incidentally the dollar is still very strong since a lot of those dollars are out of the country due to the oil trade, and other currencies are in even worse shape.

That's true, but I was referencing Steve's post with what Bernanke claimed at that time. Bernanke, Paulson and those CEO banksters from that time should all be in jail, but they never will. As long as the general public is placated, distracted and diverted with internets, social medias, sports, video games and cell phones, it's all fine and dandy

The dollar is not strong... it's lost 98% of it's value since 1913. The whole monetary fiat global system is a huge F'ing scam and it only makes people poor over time. It all will fail and crash horribly someday... when is anyone's guess.