Gold vs Silver - How to Play the Next Run - LONGTERM
A lot of requests for gold and silver charts along with some analysis. I want to be clear that investing in gold' and silver' is a LONG TERM play (could be several years but you never know) so do not expect to see profits like you do in other markets. With that said though, when they run they really run!
I started off in the physical metals market as a kid and didn't even know it. Going to the bank, getting rolls of dimes and quarters, and sorting through them pulling out the PRE-64 90% silver' coins. I would simply throw them in my collection. 1979 taught me a lesson I will never forget. When the metals run they freaking run! Those few years of collecting turned into 1000's of dollars in a flash. My first big score in investing happened at the meager age of 10, and I've been hooked ever since! Of course back then we collected everything from baseball cards to stamps.
Both silver' and gold' have pulled back from the 9 year run they had starting in 2003 and what an epic run it was. Since the bottom in Dec of 2015 both have consolidated and though gold' has started to track to the upside, silver' is just plainly running flat. This is why I like silver' here over gold'! Silver' lags gold' during down periods but when there is volatility in the world, silver' outperforms gold' tremendously, simply because more people can afford an ounce of silver' over an ounce of gold', but when the metals correct, silver' gets hit harder than gold' as evident from the chart. Silver' ran 1112% vs Gold' 657% from 2003 to 2011 and corrected -71% vs -46% for gold'. So if your just getting into the metals market, and are looking to invest long term in metals, quite simply Silver' is where I would be putting my money, and specifically 90%!
What I am simply doing is stacking silver' at these levels. As gold' is slowly trending to the upside (a sign that large investors are diversifying out of equities into metals) Silver' is trading sideways. In addition the Gold/Silver ratio is nearing an all time high at 80 ounces of silver' for every ounce of gold'. This is critical to understand as this is how you can add to your long term stack without investing any more. Over the years the ratio fluctuates between 40-80 (over time not overnight). When the ratio is high you want to stack silver', when the ratio is low you move to gold'. Nov of 2008 the ratio hit a high of 80. Had you gone to a 100% silver' stack you outperformed gold' 2.5x's over the next 3 years. As silver' outperforms, the ratio reduced where it bottomed in 2011 at just under 35. Had you then switched to gold', you outperformed both silverbugs and goldbugs.
This is why I like silver' here. We are once again trading at the 80 G/S ratio. So if I sell one ounce of Gold' I get 80 ounces of silver' (in theory). Now when the metals make that next run, I will be looking to start selling silver' for gold' around 40 and lower. So now for every 80 ounces of silver' I sell I'm getting 2 ounces of gold'. I simply doubled my gold' stack without investing another dime in the market, and when the pullback happens, I retain more of the gains. Its that simple, but it is not going to happen overnight.
Bottom Line: silver' is channel surfing above its low. I'm accumulating here for the long term. Mainly 90% and quality bars like Engelhard. I like 90% here because the premiums are low, supply is limited, rarely counterfeited, and its already denominated. When the markets run, so do the premiums on 90%, much more than generic rounds and bars. Believe me $4 over melt is not uncommon when demand supersedes supply. Dealers can not get enough. Silver' eagles are minted every year, so the premiums maintain, and actually go down on back years with few exceptions. Now many just love to stack gold' and I understand, and there is no issue with that. But if you want to look at an alternate idea to increase this gold' stack for the long term, trade the ratio!
I started off in the physical metals market as a kid and didn't even know it. Going to the bank, getting rolls of dimes and quarters, and sorting through them pulling out the PRE-64 90% silver' coins. I would simply throw them in my collection. 1979 taught me a lesson I will never forget. When the metals run they freaking run! Those few years of collecting turned into 1000's of dollars in a flash. My first big score in investing happened at the meager age of 10, and I've been hooked ever since! Of course back then we collected everything from baseball cards to stamps.
Both silver' and gold' have pulled back from the 9 year run they had starting in 2003 and what an epic run it was. Since the bottom in Dec of 2015 both have consolidated and though gold' has started to track to the upside, silver' is just plainly running flat. This is why I like silver' here over gold'! Silver' lags gold' during down periods but when there is volatility in the world, silver' outperforms gold' tremendously, simply because more people can afford an ounce of silver' over an ounce of gold', but when the metals correct, silver' gets hit harder than gold' as evident from the chart. Silver' ran 1112% vs Gold' 657% from 2003 to 2011 and corrected -71% vs -46% for gold'. So if your just getting into the metals market, and are looking to invest long term in metals, quite simply Silver' is where I would be putting my money, and specifically 90%!
What I am simply doing is stacking silver' at these levels. As gold' is slowly trending to the upside (a sign that large investors are diversifying out of equities into metals) Silver' is trading sideways. In addition the Gold/Silver ratio is nearing an all time high at 80 ounces of silver' for every ounce of gold'. This is critical to understand as this is how you can add to your long term stack without investing any more. Over the years the ratio fluctuates between 40-80 (over time not overnight). When the ratio is high you want to stack silver', when the ratio is low you move to gold'. Nov of 2008 the ratio hit a high of 80. Had you gone to a 100% silver' stack you outperformed gold' 2.5x's over the next 3 years. As silver' outperforms, the ratio reduced where it bottomed in 2011 at just under 35. Had you then switched to gold', you outperformed both silverbugs and goldbugs.
This is why I like silver' here. We are once again trading at the 80 G/S ratio. So if I sell one ounce of Gold' I get 80 ounces of silver' (in theory). Now when the metals make that next run, I will be looking to start selling silver' for gold' around 40 and lower. So now for every 80 ounces of silver' I sell I'm getting 2 ounces of gold'. I simply doubled my gold' stack without investing another dime in the market, and when the pullback happens, I retain more of the gains. Its that simple, but it is not going to happen overnight.
Bottom Line: silver' is channel surfing above its low. I'm accumulating here for the long term. Mainly 90% and quality bars like Engelhard. I like 90% here because the premiums are low, supply is limited, rarely counterfeited, and its already denominated. When the markets run, so do the premiums on 90%, much more than generic rounds and bars. Believe me $4 over melt is not uncommon when demand supersedes supply. Dealers can not get enough. Silver' eagles are minted every year, so the premiums maintain, and actually go down on back years with few exceptions. Now many just love to stack gold' and I understand, and there is no issue with that. But if you want to look at an alternate idea to increase this gold' stack for the long term, trade the ratio!
Comment:
Comment:
That should read 50 and lower not 40.
