Gold vs. Silver

[Jonleehacker]

I've been doing a bit of research looking to move some money (safely ) back into the market and found something interesting in the Gold and silver charts.

The following chart is an overlay of a Gold etf and a silver etf, both backed by physical metals and tied to the metals actual price.

So the question is, why did Silver "de-couple" from Gold in August, and does this represent a buying opportunity or a sign of danger?

 

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[MJ DeMarco]

I think because Silver demand goes down during recession and depression -- it is used in many manufacturing processes. Gold isn't widely used in manufacturing.

When manufacturing and consumer demand declines, so does Silver demand. It is the same reason why oil has been declining -- anticipation of lower demand by a bad economy.

It does look like a good buy though! Tempting!

 

[cmartin371]

You can buy Silver by the ounce vs the dollar on Oanda. I bought at $11 oz and sold around $13 last week. It dipped back below $11 again yesterday so I bought. Well over $12 now. I don't think it will hurt to pick some up while it is trading well under it's previous high of $21/oz.

 

[AroundTheWorld]

Hey Jon... what does the chart look like if you go back, say... 50 years?

 

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[Analyzer]

Can you post that chart for a longer period? I think silver normally lags gold for a while when gold goes up fast before moving up to similar levels. I think it's a market issue, when people scramble for the safety of precious metals they prefer gold (so gold goes up faster) after this first movement and if gold goes up enough/for a long enough period speculators/investors will start buying up silver...

I guess gold has a better "placement" on peoples minds as a safe haven

 

[Jonleehacker]

These etf's haven't been around that long, so the longest meaningful chart I could grab was 2 years.

My guess is that MJ is correct and the dip is a reflection of the slowdown in demand for silver as a manufacturing metal. From all indications though supplies are drastically low, so it wouldn't take much demand or a short term pinch in production to spike the price back up.

This site Monthly Gold Price vs. Monthly Silver Price 1975-2007 has comparison charts for the last 35 years which are interesting because you can see gold is back at the highs from the early 80s, but silver hasn't come close to getting back to those levels.

 

[andviv]

Good info. Rep ++ Jon.

I remember I posted a link to a video from the Rich Dad website where they talk about silver and how bullish they were about it. They mentioned that the world's reserves are below 10 years but the price has not reflected it yet. I think it was a very interesting point.

Are you looking at this with a short, mid or long term perspective?

 

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[andviv]

Found that post...
http://www.thefastlanetomillions.com/general-business-discussion/7286-rd-2008-predictions.html

See post # 3 in that thread.

 

[phlgirl]

Thank you, Andviv. Very interesting. ++++

Missed that one the first time around.

***One correction to your summary from this post - it states that in 1980, you could buy a single family home with 8000 ounces of silver. Pretty sure what they said in this video was that you could buy an average median home for 1000 ounces of silver (which at the time of the video was $15+ per ounce = $8000). So, they were saying, if you put aside $8000 today (time of video) when the currency failure occurs, you will be able to purchase a median single family home with your 1000 ounces of silver.

Oh and thanks also to Jon for bringing this back to the surface! ++++

 

[Analyzer]

Good info. Rep ++ Jon.

I remember I posted a link to a video from the Rich Dad website where they talk about silver and how bullish they were about it. They mentioned that the world's reserves are below 10 years but the price has not reflected it yet. I think it was a very interesting point.

Are you looking at this with a short, mid or long term perspective?

Actually I remember reading somewhere that there is less usable (mined and converted to bars, coins, etc.) silver than gold in the world

 

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[phlgirl]

One more interesting RD Prediction video on Silver/Gold. This one is 3 months later - March of 2008.

Rich Dad - Welcome to Rich Dad!

 

[Jonleehacker]

Are you looking at this with a short, mid or long term perspective?

I'm looking for short term. I'm actually trying to finance a doodad (a month long golfing trip to Phoenix in Feb) so if I can accelerate my funds a bit then I can play nicer courses

Thanks for the links and videos, I'll be doing my homework.

 

[kidgas]

MJ is correct in that silver has many more industrial applications--eg xray film, electronics, etc. Just over one-half of the silver fabricated each year is used in industrial applications. Silver is more plentiful than gold. When used for monetary and investment purposes, typically gold will lead silver. This is because the smart/big money will invest in gold. Silver will become popular when the masses start to purchase for investment. It is somewhat surprising that gold and silver are declining in the face of the economic uncertainty. I would suppose that many funds are raising cash for redemptions. However, when the flood of dollars, euros, yen, etc begins in earnest and people begin to protect purchasing power, gold and silver may respond accordingly. I am purchasing GG on the dip and buying puts on the spikes.

 

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[^eagle^]

anybody looked at spot silver lately?

It's back down below 10usd/oz

Is this an opportunity to buy?


I have a buy limit set at 9.15 and sell at 10 for a first time trial.

 

[MJ DeMarco]

I watch the silver price everyday ... it seems to be still on a downward trend. If we are headed for a 3 yr recession it could go down another 30% since weak demand will continue.

 

[webmaster.tim]

A nice discussion is going on, in this I think gold has demand in the market in comparison to silver.

 

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[cmartin371]

A nice discussion is going on, in this I think gold has demand in the market in comparison to silver.

Tough to tell at this point. For me I have been buying small amounts of Silver (100 units at a time). Price has been cheap and the potential reward for me out weighs the small risk. My average price is $9.20/oz. Right now it's around $10.30/oz.

 

[phlgirl]

Any new thoughts on Silver? It seems to have made a pretty steady climb since we last mentioned it in Nov. It was at approx. 10.30 and is now flirting with 14.

Any thoughts on what is causing the climb?

Predictions for the future?

 

[kidgas]

Silver is "poor man's gold". The same reasons that gold is increasing apply to silver as well. It possesses intrinsic value and can be used as a medium of exchange. With all the countries of the world racing to debase their currency, gold and silver are becoming a safe haven for investment.

 

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[EasyMoney_in_NC]

I for one have been excited for the last 3 weeks that silver is on a north bound tare. I bought the physical stuff last year, and after seeing it drop substantially over the last 9 months, I held off from buying more. I had a friend try pushing me to buy more but I wasn't convinced it would stabilize so I sat it out and now its on a $4 + increase in very short order :fryingpan:

I didn't buy for short term, but I could have been a little closer to acquiring more toys had I listened to him ('course his investment luck hasn't been that great lately, so my bet was at least a safe hedge ) I'm looking forward to that $50/ounce price point again

 

[ramy98]

Going to give this guy a bump.

 

[MJ DeMarco]

I've been in silver for about 3 months. I'm up about 7% and a few more ticks upwards Ill start writing covered calls on the positions. Basically I'm counting on some inflation down the road.

 

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[MJ DeMarco]

Silver is on a tear!

:banana:

 

[Pinnacle]

MJ, do you hold any direct silver investment or is it only in silver derivatives?

 

[MJ DeMarco]

No physical ... SLV

 

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[BryanC]

Anybody that is long Gold and Silver are going to be in a killer position in the coming years. I'm still buying Gold and Silver coins, bars, bullion and will continue to as long as I live. I personally would like to own no less than 625 loosely liquid pounds of Gold in my retirement "account"... ahem* ahem*... I mean under my mattress.

Also, the interest I am getting off of my Gold holdings it's self is killing compared to any any dollarized loan I could ever dream of getting interest off of. I mean I can create derivatives on dollars I hold, lend them out, or what ever and get some kind of return but... I also enjoy knowing that my Asset is historically proven, has intrinsic value, can be consumed, exchanged, traded, adjusts for inflation and can cash flow from derivative creation... Oh, I can also use it as collateral, create receipts in the reserve of said fractal, and milk and milk. Gosh... I just don't know another Asset like it.

 

[ramy98]

Interesting time for Silver bulls thats for sure.

 

[andviv]

I also enjoy knowing that my Asset is historically proven, has intrinsic value, can be consumed, exchanged, traded, adjusts for inflation and can cash flow from derivative creation... Oh, I can also use it as collateral, create receipts in the reserve of said fractal, and milk and milk. Gosh... I just don't know another Asset like it.

Funny, this sounds a lot to me like that other asset, Land. And then speculation rises the prices to incredibly insane values and then they drop and, although land or gold never go to $0 value, the last one who owns it is the one that loses.

I know Gold bugs will criticize me for this comment, and I am just making it as a warning that, at some point, speculation will enter the market and will drive the prices to inflated highs. Study when to exit. What is your exit point for this --or any other -- asset?

 

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[MJ DeMarco]

Funny, this sounds a lot to me like that other asset, Land. And then speculation rises the prices to incredibly insane values and then they drop and, although land or gold never go to $0 value, the last one who owns it is the one that loses.

I know Gold bugs will criticize me for this comment, and I am just making it as a warning that, at some point, speculation will enter the market and will drive the prices to inflated highs. Study when to exit. What is your exit point for this --or any other -- asset?

Yes, Gold could be our next bubble. If it moves to 1500.

I don't hold physical gold/silver because I don't invest in metals, I trade them. That means when my returns reach abnormal market returns, I sell. What's abnormal? Making 30%, 50, 60% in a few months. Since I believe buy and hold is dead, I never partake in that strategy ... EVER. That is how you get caught in bubbles and get wiped out.

 

[ramy98]

Silver up over 3% so far, gold over 1000 bucks per ounce (1% gain)