Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Trading the Ratios and Swapping Gold for Silver

Commodities / Gold and Silver 2014 Jun 27, 2014 - 11:44 AM GMT

By: Dr_Jeff_Lewis

Commodities

Primary gold investors versus silver investors are not exactly alike.

Swapping gold for silver is a trade always worth considering, especially when the ratio blows out as wide as it is now. Portability is one obvious reason for the reverse, as long as premiums match up in the transaction. But the main advantage to this kind of swap is that silver almost always tends to cover more ground percentage-wiser and faster when it is allowed to move in a significant way.


When the price ratio of gold to silver extends out into its higher ranges, the relationship tends to be called into question. But even when the ratio approaches 30:1, or even closer to its historic ratios, the relationship should always be at the forefront of investor’s minds. However, it's not as always as simple as the paper price ratio. 

A more interesting ratio is the relative buying measured primarily by U.S. mint data. Silver retail coin demand has been much stronger relative to gold, though obviously the overall dollar amounts pale in comparison. 

Within the silver demand lie important ratios. We have seen a steady increase in jewelry demand (much larger than coin) relative to industrial demand, which could have the effect of pushing the market back toward shortage very quickly. 

Nevertheless, one needs to consider the following as a review:

Rarity

Although it is not revealed by the price, investment-grade physical silver is actually as rare as gold; thanks to the amount that is melted, smelted, and mixed each year for a variety of consumer applications. And that is, of course, due the sheer size of the paper derivatives that mask the true value. 

Supply is under constant constraint by decades of artificially low prices that have made primary silver mining the most risky of ventures. Most silver is mined as a byproduct of base metals and gold production. 

Volatility

Due to the fact that most silver produced each year finds its way to a factory, the amount of silver that arrives on the retail market is only a small percentage of the total actually produced.

With such small amounts of the metal circulating, plus a massively managed and colluded price determining mechanism, silver is prone to volatile swings that occur with even the smallest shift in demand.  In fact, the majority of the volatility can be blamed on the battle between speculators and bullion banks at the COMEX. 

Although the volatility is short-lived, silver can move twice as much as gold in a single day, and the shiny metal is most likely to explode in price with any institutional activity.

The "Affordable" Gold

As gold heads back toward $2000 per ounce, investors will very likely experience sticker shock.  Silver, on the other hand, is still affordable. It is cheap by practically any measure, and the cheapest of all assets in terms of inflation adjusted value. An investor can take delivery of more than 60 ounces of silver before owning even one ounce of gold.

Although retail investors can buy grams and half ounces of gold, the practicality of the purchase comes into question.  Single grams or fractional gold is generally expensive, often costing as much as 15-20% over spot.  In contrast, silver ounces, which cost less than gold grams, often trade with a much lower premium.

Fractional gold or even junk silver may not even be the best to use as temporary currency - especially in a crisis. 

This is why it almost laughable to read the impression of many traders - even those who are close to the sector - who assume gold and silver in investors are always “all in” and/or have a very narrow idea of how the metals could work in a hyperinflation or currency crisis. 

The fact is, the majority of physical al silver and gold investors in daring to consider the worst have realized a much more complicated and sophisticated approach to predation. 

Room to Run

Today's silver price is significantly below the historical 1980 high in silver prices and well behind the historical gold to silver ratio.  Silver has a 200% increase in price before it reaches a new high, and this is before calculating real inflation. Gold is a bit further along, though still comparatively undervalued. 

Adjusting for inflation, silver could run as high as $160-270 per ounce before striking a new high in real dollar terms.  Although both precious metals show excellent investment opportunities, silver is certainly best positioned for double-digit growth.

Trading gold for silver or vice versa makes some sense as long as the ratios are extended out to extreme ranges and that the products match up relatively speaking in terms of premium. 

The truly interesting ratios lie below the surface. They can be found in the relative buying patterns, the movement of physical metal in and out of the COMEX and the relative size of the derivative positions held net short by the largest (bullion) banks. 

The Investment of a Lifetime

Silver is rare, inexpensive, and a protection against inflation. It is poised for one of the best bull runs in history.  Yet unlike an actual “bull run”, the move in silver will be a readjustment to reality after years of fantasy pricing. 

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2014 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in