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<p>[QUOTE="yakpoo, post: 3657042, member: 18157"]Ok...I'll take a shot. The short answer is that these are two different commodities whose supply/demand dynamics are quite different. Silver is an industrial metal produced as a secondary metal in just about every type of mine. Gold has some industrial uses, but is mostly used for Jewelry and Coins as a liquid store of wealth.</p><p><br /></p><p>Supply/Demand can fundamentally alter the relationship of the two commodities. During strong economic times, Silver may rise in value relative to Gold due to industrial demand while money flows out of Gold and into Equities. During weak economic times, Silver may drop (weak demand), while Gold may rise as a hedge against lower interest rates and a weaker Dollar.</p><p><br /></p><p>In either case, the ratio between Gold and Silver changes from one extreme to the other...but (so far) in a range between 45 and 85 (a few spikes higher and lower).</p><p><br /></p><p>[ATTACH=full]982915[/ATTACH]</p><p><br /></p><p>Given that the value of the Dollar is a constant at any moment in time, the price relationship between Gold and Silver should accurately measure the relative supply/demand for the two commodities.</p><p><br /></p><p>However, with that said, you also have speculators who drive prices based in irrational fear/greed. Although gold and silver are different, they both maintain their unique relationship to fiat currencies...in this case, the U.S. Dollar.</p><p><br /></p><p>Speculation plays a much larger role in the price of PMs than industrial supply/demand. Generally, when one PM rises or falls an inordinate amount relative to the other, that is the result of speculation and an opportunity to make some money when the GSR reaches extremes.</p><p><br /></p><p>I don't trade the GSR myself, but was reading where some folks in this situation are buying out-of-the-money Gold puts and Silver calls. This strategy makes money when the GSR drops...regardless of whether there is a rise in Silver or a drop in Gold.</p><p><br /></p><p>I'm not endorsing any GSR strategy...just trying to answer the question.</p><p><br /></p><p>As far as 2019 is concerned, Central Banks around the world are having a race to see who can devalue their currency the quickest...which puts upward pressure on PMs (relative to the denominated currency).</p><p><br /></p><p>I believe that Silver speculators are still licking their wounds after President Obama raised margin requirements 11 times in three (3) weeks in 2011. That effectively popped the Silver bubble. I think memories of 2011, plus increasing supply/demand for Silver, has speculators putting their money into Gold instead of Silver.</p><p><br /></p><p><b>SILVER:</b></p><p>[ATTACH=full]982951[/ATTACH]</p><p>[ATTACH=full]982930[/ATTACH]</p><p><br /></p><p><b>GOLD:</b></p><p>[ATTACH=full]982959[/ATTACH]</p><p>[ATTACH=full]982958[/ATTACH]</p><p><br /></p><p>What could change? ...an improving economy that pushes the demand for silver higher. It takes time to bring low margin mines back online, so silver prices (buoyed by speculation) could come back inline with Gold...or even exceed. </p><p><br /></p><p>Is that likely? Probably not as long as a global recession persists. However, a significant resolution to the current trade wars will be very bullish for Silver. That's when I'll take a look at Silver. Currently, Silver is at (or near) production costs. It could drop lower than production, but that will just take mines out of production.</p><p><br /></p><p>Long term, current prices for Silver are attractive (imo). I made many posts when Silver was $35/Oz to say that Silver shouldn't be accumulated again until it drops below 18/Oz. Well...here we are!</p><p><br /></p><p>Ok...what's my grade?[/QUOTE]</p><p><br /></p>
[QUOTE="yakpoo, post: 3657042, member: 18157"]Ok...I'll take a shot. The short answer is that these are two different commodities whose supply/demand dynamics are quite different. Silver is an industrial metal produced as a secondary metal in just about every type of mine. Gold has some industrial uses, but is mostly used for Jewelry and Coins as a liquid store of wealth. Supply/Demand can fundamentally alter the relationship of the two commodities. During strong economic times, Silver may rise in value relative to Gold due to industrial demand while money flows out of Gold and into Equities. During weak economic times, Silver may drop (weak demand), while Gold may rise as a hedge against lower interest rates and a weaker Dollar. In either case, the ratio between Gold and Silver changes from one extreme to the other...but (so far) in a range between 45 and 85 (a few spikes higher and lower). [ATTACH=full]982915[/ATTACH] Given that the value of the Dollar is a constant at any moment in time, the price relationship between Gold and Silver should accurately measure the relative supply/demand for the two commodities. However, with that said, you also have speculators who drive prices based in irrational fear/greed. Although gold and silver are different, they both maintain their unique relationship to fiat currencies...in this case, the U.S. Dollar. Speculation plays a much larger role in the price of PMs than industrial supply/demand. Generally, when one PM rises or falls an inordinate amount relative to the other, that is the result of speculation and an opportunity to make some money when the GSR reaches extremes. I don't trade the GSR myself, but was reading where some folks in this situation are buying out-of-the-money Gold puts and Silver calls. This strategy makes money when the GSR drops...regardless of whether there is a rise in Silver or a drop in Gold. I'm not endorsing any GSR strategy...just trying to answer the question. As far as 2019 is concerned, Central Banks around the world are having a race to see who can devalue their currency the quickest...which puts upward pressure on PMs (relative to the denominated currency). I believe that Silver speculators are still licking their wounds after President Obama raised margin requirements 11 times in three (3) weeks in 2011. That effectively popped the Silver bubble. I think memories of 2011, plus increasing supply/demand for Silver, has speculators putting their money into Gold instead of Silver. [B]SILVER:[/B] [ATTACH=full]982951[/ATTACH] [ATTACH=full]982930[/ATTACH] [B]GOLD:[/B] [ATTACH=full]982959[/ATTACH] [ATTACH=full]982958[/ATTACH] What could change? ...an improving economy that pushes the demand for silver higher. It takes time to bring low margin mines back online, so silver prices (buoyed by speculation) could come back inline with Gold...or even exceed. Is that likely? Probably not as long as a global recession persists. However, a significant resolution to the current trade wars will be very bullish for Silver. That's when I'll take a look at Silver. Currently, Silver is at (or near) production costs. It could drop lower than production, but that will just take mines out of production. Long term, current prices for Silver are attractive (imo). I made many posts when Silver was $35/Oz to say that Silver shouldn't be accumulated again until it drops below 18/Oz. Well...here we are! Ok...what's my grade?[/QUOTE]
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