Discussion in 'Bullion Investing' started by HardTruths, Jun 7, 2016.
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Basically, I am trying to put together some sort of framework to look at when investing. I do not want to get top heavy in gold (I wish) and have very little silver, or vice versa... I'll say this though. There is so much more to it than I originally thought.. The answers here have made me realize that..
I'm not married to a ratio. It's hard to explain but I am just trying to figure out if the ratio's mean anything or if they can be used as an indicator to buy either gold or silver.
For example, lets say the ratio is 100 to 1 and it usually averages around 50 to 1. That would be an indicator to buy silver. Once it gets back to the historical average of 50/1 then it would be an indicator to buy BOTH gold and silver or to purchase 50 oz of silver for every ounce (1 oz) of gold. .. Actually, I am probably wrong and the more I explain it the more I realize that I am probably not making sense. I should be taking business classes instead of Health Science.
Agree with this summation. The "historical" gold/silver ratio was the result of both being used as money. Additionally, the market price of gold was fixed in the US by the government while silver was not. So though the ratio was about 16 until 1933 monetarily, the silver spot price fluctuated substantially, just as it does now.
Gold is more than just a commodity. It is still treated as quasi-money. Central banks still use it as a reserve asset. If gold was viewed as just another commodity, it doesn't make sense that its price has outdistanced all other commodities (including silver) since the US abandoned gold convertibility for foreigners in 1971 because it is historically overpriced starting in the 1970's versus previously. I interpret your posts to disagree with this view but its inflated relative price indicates that enough people believe otherwise.
Silver on the other hand is primarily used as a commodity, though it is bought by a large number (low proportionally) as a store of value.
50 to 1 is what the ratio is in my 50 years of watching... I would tend to invest in silver right now as gold is way too high! However, I don,t invest in precious metals anyway because I don,t have the millions it would take to actually turn a substantial profit. I know of no investor who has made any real profit if they invested after the early 2000,s... with exception of the several Govt. approved suppliers who distribute all U.S. and foreign bullion.
Gasoline isn't typically used as a store of wealth. USD, silver, and gold are very similar to each other in that regard. Gasoline, not so much. It could be, but in general, most people don't buy gasoline to sit on it for a number of years until the value goes up and then sell it.
However, if I were in a bind and I needed gas and I didn't have much cash, but I did have PM, I would consider swapping PM for gas if the terms were favorable.
Absolutely. I generally try to make the spread work in my favor. I take my time buying and selling small quantities instead of trying to load or unload all at once at the mercy of a dealer. By doing so, I typically sell at a higher premium than I can buy for, and sometimes, when I'm lucky, I can even buy at a discount. (Using 8x ebay bucks and CC cash back is a good example)
Absolutely, although I apparently got booted off the list for eBay bucks promotions years ago.
Another trick I like: my grocery store does "fuel bonus points", where you get 10 cents off per gallon at a fillup for every $100 you spend in the store. They sometimes do 4x fuel point promotions for gift cards. They include eBay gift cards in the promotion. And you can pay for gift cards with a credit card that gives cash back. With a 20-gallon fuel tank, that means I'm getting almost $9 back for every $100 I put into eBay GCs.
I haven't yet tried the tactic of buying eBay gift cards (to get the gas discount), then buying Kroger gift cards on eBay, then using those to buy more eBay gift cards...
This may seem a little off-topic, but those sorts of incentives and side benefits do seem to be a lot more common with fiat transactions...
You nailed the value of the GSR right there.
They're both "just a commodity" whose values "both kind of go up or down together".
Let's look at the two parts separately:
"They're both "just a commodity"
Indeed. As such, they both serve the same purpose for many people, so it doesn't matter to them if they have $1000 worth of silver, or $1000 worth of gold.
...whose values "both kind of go up or down together".
They don't go up or down in lock step, there is volatility between them. Any time there's volatility between commodities, there's a potential for profit.
The GSR helps people make assumptions about which commodity is a better value for them at that particular moment. I say "helps", because of course it isn't the only thing to take into consideration.
Common assumptions I've noticed here in the Bullion Investing Forum:
Some people assume that every time someone buys PM, they do so from a dealer where they are paying a 20%+ premium.
Some people assume that every time someone sells PM, they are selling it to a dealer for spot, or even less than spot.
Some people assume that every person's PM investing goal must be to earn a monetary profit.
Some people even go so far as to assume that when a person is investing in PM, they cannot possibly be investing in other investment vehicles at the same time.
People rarely assume that others are only investing a tiny fraction of their disposable income on PM.
People rarely assume that investing in PM is essentially a hobby for some people.
It seems everyone outside of this forum assumes that everyone inside this forum is hoping and praying for a SHTF scenario where we can use our PM for barter.
Yeah, I've only managed to use the 8x rebate once, and I don't think I've received an offer since then. Maybe it's only 1 per customer, but I think I've heard people talk about using the 8x more than once. Dunno.
Then I sit back and wait for one of their good sales that you usually can't combine discounts on, and I pay for a large item with those gift cards.
What makes it even better, is they are pretty much the only gun dealer in town that will frequently have 10% off all guns and ammo, and their prices are already competitive to start with.
I really just don't believe in the idea of quasi-money. To me we have three categories of things. Money, things, and essentials. Money is obviously money, essentials would be food and water aka things we have to have to live (oil could probably fall into that category for modern society), and then things is essentially everything else. Everything has some value, pretty much anything can be sold for some amount money whether it be a house/car/metals/furniture/possessions ect. Money can be stored in basically form in this things category which would technically make everything quasi-money. The appeal of metals for banks is that a large amount of value can be stored in a smaller area and the ease of buying and selling.
Exactly. It can be helpful if they get completely out of sync with each other in terms of their behavior as that wouldn't make a lot of sense and it is one of the ways we have of analyzing buying behavior, but the idea that it should be 30:1 or 50:1 ect is marketing
Yes, I understand the concept your are trying to convey.
All I am saying is that the price of gold makes it apparent that in the aggregate people view gold as more than just another commodity, just as they do with diamonds which are anything but rare. And its value is certainly not tied to its utility either because, although it can be used for other purposes, it isn't because it is uneconomical to do so due to much cheaper alternatives.
There is no absolute distinction between money and non-money, it is completely arbitrary though governments and central banks (and probably Warren Buffet going by his comments) want everyone to believe it because of the fiat money monopoly. As I presume you know, in the past in some societies, many different objects were used for this purpose. If a free market for money existed, I believe multiple forms (including gold) could or would co-exist simultaneously.
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