GSR

[Market Harmony]

The Gold to Silver Ratio (GSR) is something of which is supremely interesting to me.

At one time, a 15:1 ratio was the norm. Recently 75:1 seems to be average. But, back at the end of April 2011, the GSR was about 33:1. That was a significant difference. For at the time, if you had sold all of your silver and purchased gold with the proceeds you would currently be sitting on the equivalent of over 2 times your original stack of silver in terms of the GSR.

Let's think hypothetically to understand this a little better:
You had 1000 oz of silver in April 2011 and sold it for $48 an oz... proceeds of $48,000.
You then traded those proceeds into gold at $1,530, and you now have 31.37 oz of gold.
Today's gold price of $1100 means that the dollar value of your gold declined to $34,500.
Today's silver price of $14 means the silver value of your holding increased to 2,465 oz of silver.

Sure, there are transaction costs, so maybe decrease that by 10%... you still have 2,200 oz of silver. This is why I love the GSR...

Count your wealth in ounces, and your life will change.

[Market Harmony]

Here is a link to see a 5 year chart of the GSR. Each bar represents one week of trading during those 5 years.

http://stockcharts.com/h-sc/ui?s=%24GOL ... 8950918909

[Cu Penny Hoarder]

I have a friend who is very wealthy and 33% of this wealth is in PM's. Deals mostly in/with bars. He routinely trades his silver for gold and vice versa based on the GSR. He is smart and very, very patient. The amount of silver and gold he's acquired based on trading the GSR is astonishing.

[silverkid]

That's good food for thought. Will require much patience at this point to exploit but sounds like solid thinking.

[silverstacker]

Here is a link to see a 5 year chart of the GSR. Each bar represents one week of trading during those 5 years.

http://stockcharts.com/h-sc/ui?s=%24GOL ... 8950918909

That's great! Thanks for this link

[dakota1955]

I also have been watching the GSR. I have been wondering if it would be a good time to trade some gold for silver. Any one with thoughts out in the forum?

[Recyclersteve]

There is an old book which discusses trading with the gold/silver ratio in some depth. It is called Making Inflation Pay. It was written by California coin dealer Jonathan Hefferlin and published in 1981. It is available in paperback and has some wild war stories about all types of random stuff he bought and sold. The book should be fairly easy to find in the Internet.

[plus1hdcp]

There is an old book which discusses trading with the gold/silver ratio in some depth. It is called Making Inflation Pay. It was written by California coin dealer Jonathan Hefferlin and published in 1981. It is available in paperback and has some wild war stories about all types of random stuff he bought and sold. The book should be fairly easy to find in the Internet.

Thanks for the reference. I will have to check the local library.

[johnbrickner]

Ditto on the references. Hefferlin published shortly after a historical GSR low around 15. His perspective on this would be interesting to see.

My son the math wiz assisted me on a hypothetical: Using the GSR chart going back 20 years we can see highs and lows around 80 and 45. Assuming a start of 10 oz gold convert to 800 oz (80-1 ratio) silver in ''97 (or start with 800 silver). In '98 convert to 18 oz gold with GSR below 45. In 01 convert to 1422 silver with GSR of 80. In '06 convert to 32 oz gold with GSR below of 45. in '09 convert to 2528 oz silver with GSR 80. in '11 convert to 56 oz gold with GSR below 45 and convert in late '15, early 16 GSR 80 to 4495 silver oz.

For a whopping total return in oz of PMs of 562% or ave annual return of 28.1% That kind of return will make you wealthy.

[68Camaro]

And if I had bought Apple, Microsoft, and Google at their IPOs I would be able to buy the Fed.

But the point is taken that there is a potential play here. It's less volatile than the fluctuations of the daily, weekly, monthly market manipulation, so you are less likely to get stung, and in the end at least you're holding physical something anyway.

[InfleXion]

To me it seems like this is a good time to swap gold into silver and/or FRNs into silver. I intend to swap some of my silver for gold if the GSR ever gets down around 20 again. Anything higher than that is skewed in favor of gold in my mind based on the mining ratios and that a lot of silver ends up in the garbage where as most all of the gold ever mined is still around. Due to variance in coin premiums and the cut a middle man will take I only intend to play the GSR at key inflection points as opposed to trying to get small gains here or there.

[beauanderos]

You can accomplish essentially the same thing by not buying gold right now. Buy only silver, no matter how good the gold offer might look. When
the ratio is at the other extreme, do the opposite.

In principle, playing the GSR works alright, but if you have several thousand ounces of silver to swap into gold it becomes impractical.

[Mr Paradise]

Here's a video from a guy on YouTube that helps explain the GSR for those new to the game.

https://m.youtube.com/#/watch?v=2teP1CZRQ98

[Cu Penny Hoarder]

You can accomplish essentially the same thing by not buying gold right now. Buy only silver, no matter how good the gold offer might look. When
the ratio is at the other extreme, do the opposite.

In principle, playing the GSR works alright, but if you have several thousand ounces of silver to swap into gold it becomes impractical.

Tough to ignore Au... it's just so pretty and compact.

I realize that most here are probably not doing this, but just as an FYI...
My friend who trades the GSR trades Ag in 100-1000 bars. He lives in LA and always has two armed security guard with him. Odds are your LCS will not be able to do this, you need to find someone who handles large amounts of PMs. A downside to trading the GSR in very large amounts is that it can attract attention because the dealer must report what is going on. The IRS audited my friend a few times over the last 30 years. Since he is doing everything legit, there was never an issue.

[Market Harmony]

You can accomplish essentially the same thing by not buying gold right now. Buy only silver, no matter how good the gold offer might look. When
the ratio is at the other extreme, do the opposite.

In principle, playing the GSR works alright, but if you have several thousand ounces of silver to swap into gold it becomes impractical.

I respectfully disagree with your entire statement. Thinking small never accomplishes anything big.

In JohnBrickner's post, he turns 10 oz of gold into 4495 oz of silver with only 7 trades spread out over 20 years. To ship 5000 oz would only take 5 MdFRB... better yet if you could just drop it off at a dealer's shop. I would venture to guess that every city over 150,000 has at least one dealer able to handle this transaction. If not, then you can ship it. Impracticality dismissed.

Also, if you just keep buying, then what is the end game? Dump it all? If you think moving 5000 oz of silver is impractical, then just wait until you want to move an entire hoard of unlike things.

To those that want to begin a GSR portfolio, please contact me and I will do my best to accommodate your trades.

[Market Harmony]

The GSR is currently moving higher and against a level (80) that it not typically supported by the market. With the global economies in a serious state of flux, Gold, not Silver, will be a considerable safe haven for big money. Folks, we are small potatoes in this game of money management... not even an eye on a small potato. Even a full safe doesn't compare with the money being sloshed around in global markets. Should Gold become the target of a small slice of this kind of money, then the GSR will go above 100. The Silver market is too small for this kind of money.

A trade out of Gold and into Silver may soon be on the table, if not already. Many, I am sure, have already begun to make the trade...

[Market Harmony]

Today the GSR is over 82

[InfleXion]

I wouldn't be all that surprised if the GSR continued higher, considering that broader markets are still struggling. Gold gets the knee jerk safe haven reaction, but I expect silver to follow after being on discount for longer than gold.

Back in the Great Depression for example, it took a couple years longer for silver to catch up to gold in relative growth after faith in the stock market was lost.

I'm all too happy to continue buying silver at this skewed ratio. I don't believe this absence of equilibrium will last throughout my lifetime (mining ratio is more like 10:1, not 80:1, and more way silver gets wasted in landfills than gold), but even if I'm wrong about that I'm just happy to have tangible assets that are safe from the financial system.

[Lemon Thrower]

all the historical stuff about the GSR above is true, but you have to ask yourself are there still markets, and will it continue to be true?

my suspicion is that many markets are maniuplated, either directly or indirectly as the result of fed easing.

interest rates and oil are the main ones, gold too, and silver is a tiny backwater.

if you want to look at ratios, look at the ratio of gold to oil. there is a fairly tight range the last 100 years. what that says to me is that it will be difficult for gold to increase much until oil does. and by extension, silver won't do much until oil moves up.

its good to know that silver is at the top end of its range on the GSR, but that alone does not mean its going to move.

the 2011 move to 33 was a short covering aberration imho.

[Lemon Thrower]

all the historical stuff about the GSR above is true, but you have to ask yourself are there still markets, and will it continue to be true?

my suspicion is that many markets are maniuplated, either directly or indirectly as the result of fed easing.

interest rates and oil are the main ones, gold too, and silver is a tiny backwater.

if you want to look at ratios, look at the ratio of gold to oil. there is a fairly tight range the last 100 years. what that says to me is that it will be difficult for gold to increase much until oil does. and by extension, silver won't do much until oil moves up.

its good to know that silver is at the top end of its range on the GSR, but that alone does not mean its going to move.

the 2011 move to 33 was a short covering aberration imho.

[johnbrickner]

The G/S ratio is taking a dump today. It's been sliding ever so easily off it's top and we've had our 2nd nice dip (of a point or so) now down to around 79 as I write. The day isn't over nor does a dip or two in the beginning make a trend. It's a total 6.25% move off it's recent high and this with both gold and silver moving up. Personally, I'm liking it.

[Know Common Cents]

I've seen more articles (some more opinionated than factual) about the GSR in the past 6 weeks than all of the past couple of years.

Not quite sure what that equates to relating to bull or bear PM markets. Did an informal survey with 4 regular PM buyers at my LCS. One says he pays attention to it before a major PM purchase, but often disregards any obvious trend and is ruled by emotion. Another knows of it, but says he can't easily follow or calculate it. The remaining two tried to define it between themselves, but quickly decided it's something that rich people pay attention to.

[Lemon Thrower]

when the uptrend begins, its usually gold first followed by silver. so the expansion in the GSR does not surprise me.

with negative rates looming, an increase in both metals seems likely. however, a retest of $30 for oil seems likely also. those two forces will really stretch the oil to gold ratio.

[InfleXion]

when the uptrend begins, its usually gold first followed by silver. so the expansion in the GSR does not surprise me.

with negative rates looming, an increase in both metals seems likely. however, a retest of $30 for oil seems likely also. those two forces will really stretch the oil to gold ratio.

I think the dollar is more at risk from low oil prices than metals. With less petro-dollars circulating at lower oil prices, that's a hit to monetary velocity which could mean deflation for some time to come. Not that we'll see better prices in food or other necessities, but making a buck could be difficult for companies and this doesn't bode well for the economy, nor does the Baltic Dry Index. If the Fed isn't doing QE, I don't expect stocks to hang in there either. We could be on the cusp of some upside in metals due to the fear trade.

[Lemon Thrower]

If the Fed isn't doing QE, I don't expect stocks to hang in there either. We could be on the cusp of some upside in metals due to the fear trade.

certainly possible. but then in the metals rally but not oil, it will really stretch the oil to gold ratio to inprecedented levels.

the oil to gold ratio is discussed less than the GSR, but under the petro dollar system and even before it traded in a very consistent range.