Gold vs Silver in the long hall

Am I the only one who thinks that gold is a bad investment compared to silver in the long run? Here's my thoughts on the subject. Gold, while a precious metal, has little to no industrial use. If the economy tanks (the thought behind investing in precious metals), and everyone is basically poor, metals will only be worth what someone can pay for them. In a bad economy, luxuries are forgone. With little demand for jewelry, I think the price of gold will drop like a rock. Silver, on the other hand, has a significantly better industrial use, so I think it would be a more sturdy metal. In the same respect, if prices weren't so low to be practical to invest in, I actually think that copper, aluminum, and steel would be the better investments than either.

So tell me what you think.

 

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Gold has all sorts of industrial uses, but it is the world's preferred monetary metal. Lots of governments are buying gold, but almost none are buying silver for anything but coinage purposes.

Silver is often produced as a by-product of base metal mining, and more than 700 million ounces were mined last year.

I can't envision a scenario where gold goes down significantly while silver goes up.

 

But are any of those possible industrial uses really practical? Gold is a pretty soft metal. I can't really think of anything it's be exceptionally practical for. Examples? I'm not saying you're wrong, I'm just perplexed.

 

Here's something to get you started:

http://geology.com/minerals/gold/uses-of-gold.shtml

 

In a "bad economy" the industrial use of silver will drop substantially and the resulting surplus will cause silver prices to decline. I think it's a fool's errand to try to figure out which will perform best and to hold a strong opinion either way. The better course is to hold both so you won't be left behind if one rises and the other trails. That said, silver prices are below the all time highs and gold is at the all time high, so silver might have a bit more upside than gold, but not for any of the reasons you state.

 

I hear people say this, that gold is at an all time high but silver is not. I believe both are in nominal dollars if you agree that the Hunt's actions were an attempt to corner, and the price achieved was not a long term supply-demand price but a market aberration that lasted only a few days. To me silver peaked around $35 in 1980 absent that, so I say we are still in a nominal dollar high for long term demand.

OP has points for silver, but there are equally strong points for gold. I was just talking to a chemist Saturday who works on circuit boards about how gold has made a very strong comeback on them due to anti-lead provisions. I am not saying gold has a lot of industrial demand, and am not a gold bug, but always remember there is just something weird with human emotions and gold, and gold is much rare than silver. I have always been a silver lover myself, my stockpile of PM attests to that, but I do not love it so much I would only invest in it for all of my PM purchases.

In securities, there is alpha risk and beta risk. Alpha is the risk specific to a stock, like if there is a fire in that companies plant, or an Enron situation. Beta is market risk, meaning the whole market going up or down. Beta cannot be avoided much, but alpha risk should be blended away by holding multiple securities. I say the same should be done with PM, hold many of them on the chance one may go up or down disproportionately.

To the OP, the reason to hold PM is not a doomsday scenario, but rather the more pedestrian reason of protecting versus currency devaluation. In a doomsday scenario you want farmland, seeds, bottled water, canned food and guns. ANy PM is worthless. For a more likely scenario of high inflation or dollar devaluation, PM can protect the real purchasing power of your portfolio.

 

You are speaking my language. Silver is the most reflective, best thermal conducting, best electroconducting metal. It cannot be replaced in the vast majority of its industrial applications, nor recouped, and is already considered the 'cheap alternative' to many other metals. In the event the economy does not do well and industrial demand drops, it will still behave as a monetary metal and run along with gold. Above ground available silver is at the lowest level it's been in 700 years. The entire human accumulation of silver has been close to being used up, and silver is 7-15 times more rare than gold above ground depending on which sources you use, and estimates are difficult to nail down. The numbers I go by are 7 billion oz of gold which is generally agreed upon, and between 500 million oz and 1 billion oz of silver above ground. Of course some could come out of the woodwork, but the declining trend is clear and is a warning sign to me that silver may be the first metal to become unavailable at some point down the road. Mines are also going deeper because they've tapped most of the easy to develop reserves. Due to epithermal deposition silver primarily exists near the surface of the earth's crust, and will likely become increasingly expensive and difficult to mine while demand from things like solar panels, tech gadgets, and the countless other applications for nano silver will likely cause demand to exceed mine supply and continue to use up existing resources.

Nothing is assured though.

 

Regarding the first paragraph, even if you consider $35 to be the high, gold is still more than twice the old high while silver is less than 20% above. So silver may still be a relative bargain.

Regarding the second, I think doomsday is a highly improbable event where nothing can really protect you anyway. I own PMs because I expected them to rise, and expect them to continue to rise so I can make money. My goal is a high rate of return to stay ahead of inflation, not survival.

I know some folks expect to guard their canned food and gold by shooting all the other folks guarding their canned food and gold, but this is more of a mental illness than a plan in my opinion.

 

Hi. IMHO you're always going to find differing opinnions on precious metals. Mostly because there are so many variables that go into the market. As you can see from the responses this thread has generated, even the well informed and respected opinnions differ from one another. So your best bet is to just research the heck out of what are your options.

The base metals like Copper, Alluminum, Iron etc... all have a major roll in industry. The problem is that they are plentiful, easy to recover or recycle, and often easy to substitute. This makes them less attractive to investors. There is however good money in salvaging these metals (from old buildings, cars, appliances, whatever) and selling them to a scrap yard.

 

Silver's already had its run. It got way ahead of the dollar and is hyperinflated. This was largely due to marketing by the dealers through their doomsday newsletters and conspiracy theory blogs. There's no shortage of the metal.

 

Well, your wrong about silver being hyperinflated. The price is lower than it was 31 years ago not even accounting for inflation. And something doesn't have to be in a shortage condition to rise in price.

 

I don't disagree with either point, just pointing out I really don't view the abberation of Hunt's action as a true price of silver in 1980. I view my PM as a commodity hedge to my portfolio, and as such has helped weather some market activity the last few years, so it did its job.

 

Just curious, do you consider these massive coinages of ASE and other issues to be "used up"? This is the details in which these statements get bogged down in. I view most bullion coinage as inventory, while places who come up with such sayings are putting ASE, rounds, bars, and other types of silver sold to investors as "usage". The amount of industrial, non recoverable demand has been going down according to the Silver Institute, while "investment" demand has been going up. Are you saying you believe all investor bought silver is true demand and usage, or do you think it is inventory that can be sold on the marketplace whenever an investor wants to get out of silver? The answer to that question greatly changes the statements you have made above.

 

Although the question wasn't directed to me, I would answer that it will take prices much higher than the current price of silver to entice most ASE holders to sell them to a refiner for the going refiner rate for silver. So they are effectively unavailable to the industrial users until the rest of us have made a considerable amount of money.

I would also advise that in my opinion, the Silver Institute just about always takes the side of the silver users over silver producers and generally conveys information in a manner that seems to be intended to depress the price. They are the only game in town for much of the statistical info regarding silver, but they are still suspect.

 

I have seen newspaper articles of stores doing the above. At first glance it seems like a steal. Do the math and it is a steal... whoever takes the above deal is getting robbed. Coinflation has a pre 1964 dime valued at $2.92ea. Two of these would equal $5.84 in silver value. Gas around here is currently $3.65/gal. Sorry, Ill pay for gas with my FRN's.

 

Well you guys have definitely brought up a lot of things that I never thought about. Thanks for all of the opinions guys, they've definitely given me something to think about.

 

I wasn't advocating it as a consumer. I just thought it was a creative idea for a retailer.

 

You bring up a valid point. Above ground available (scrap) silver does not include bullion that investors have stashed that may at some point become available and skew the current metrics. In fact, this is practically a certainty if you ask me, and will be part of the ebb and flow if/as prices rise and profit taking ensues. It is going to be a hodgepodge no matter how you slice it, and to say we know that X percentage of folks with silver are willing to part with it vs. hold on to it would be speculation. Some people may realize that the price is going up for a reason and cling to it, others may say hey I'm taking a cut while the getting's good. I am merely pointing at the trend, and the extremely low levels of scrap out there which says a lot to me. So no, I don't consider investment silver as being used up, but it's also not readily available. It's only available for the right price.

[edit]
I just came to the realization that this line of thinking includes investment gold as part of the above ground available supply, while investment silver is not, or at least appears not to be in the charts I've looked at. This definitely throws a wrench into the ratio. Any additional clarity would be appreciated as this is not the most clear cut situation.

Here are the charts I have been using, taken from the following article:
http://www.chrismartenson.com/blog/screaming-fundamentals-owning-gold-and-silver/59850


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Maybe because I know better, I thought this retailer WAS pointing out the value of yester-years money as greater than todays. A point well taken when printing more money is considered an answer to todays payment plan on our deficit.