Silver Bullion vs Gold Bullion as an investment

Discussion in 'Bullion Investing' started by masterswimmer, Mar 8, 2019.

  1. masterswimmer

    masterswimmer Well-Known Member

    Greetings all. I'll say this is my hello to y'all since it is my inaugural thread.

    I've got a theory on which is the better bullion investment. Hear me out and comment, refute, or agree as you see fit. I'm very thick skinned, so any haters are welcome to go at it as well. I can take criticism, but like most I do like accolades too :)

    Gold bullion is attractive. It has an allure that no other PM has. It has stood the test of time. It is one of the easiest PM's to accumulate and store since it takes up CONSIDERABLY less space than silver. Gold has value not only as an investment, but also in manufacturing and electronics. Holding gold in ones hand feels substantial, even as little as 1/4 and 1/2 oz coins, ingots or bars feels hefty. Hell, gold bullion is sexy!

    Silver bullion also has an attractive side to it. Not like gold IMO, but 10 oz bars and kilo bars are something to behold. Silver is also used in manufacturing and has value industrially as well as an investment. Suffice it to say silver is much more of a space hog when accumulating sizable quantities. Not nearly as sexy as gold, but silver does have an appeal to thousands of collectors, therefore it also maintains a liquidity just like gold.

    At this point in the discussion it appears as if my investment of choice would be gold. I must offer an au contraire at this notion.

    As most if not all know on this forum, gold has peaked at an all time high of ~$1,900/troy oz. A nice price for those selling for sure.

    Silver on the other hand has peaked at only ~$50/troy oz. Nothing nearly close to the stratospheric price of the shiny yellow PM. So how can silver be even mentioned in the same breath as gold as an investment vehicle? Here's how....math, statistics, percentages.

    With gold at approx. $1,300/troy oz today, an investment in 1oz of gold would obviously cost ~$1,300. No rocket science there.
    With silver at approx. $15/troy oz today, an investment in 1oz of silver would obviously cost ~$15. No rocket science there either.

    Here's the fun part. If gold were to rise to its all time high of $1,900/oz, and you sold your 1 oz stash, you'd profit $600 ($1,900 sale less $1,300 cost). This would amount to a profit of 46.2% ($600/$1,300).

    If silver were to rise to its all time high of $50/oz, and you sold your massive stash of 1 oz, you'd profit $35 ($50 sale less $15 cost). This would amount to a profit of 233% ($35/$15).

    In order for you to realize the same 233% profit in gold with a purchase price of $1,300, you'd need to see gold rise to $4,329/oz ($4,329 sale price - $1,300 purch price = $3,029 profit) ($3,029 profit / $1,300 purch price = 233% profit).

    Can gold reach $4,329/oz? Absolutely. Is it likely any time soon? I'll go out on a limb and say HIGHLY UNLIKELY.

    Can sliver reach $50/oz? Absolutely. Is it likely any time soon? Who knows, but it did reach $49.82/oz in 2011. It also reached $50/oz in 1980. I'd say it is MUCH MORE LIKELY to reach $50/oz than it is for gold to reach $4,329/oz. I'd say it's more likely to reach $50/oz before gold even reaches $2,500/oz.

    Keep in mind, in a true TEOTWAWKI scenario (The End Of The World As We Know It), PM's will have very little value. So my investment outline above is not for a EDITED: LANGUAGE ( ABBREV) occurrence, it is as a hedge against inflation with hopeful investment gains attached.

    Discuss..........
     
    Last edited by a moderator: Mar 8, 2019
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  3. CoinBlazer

    CoinBlazer Professional Teenager

    Welcome to CT
    Very well written
    I would love for you to comment more on industrial uses of gold or silver, because if silver is so much cheaper, companies would rather use that than gold, right?
     
    masterswimmer likes this.
  4. CoinBlazer

    CoinBlazer Professional Teenager

    I also heard of the diversification theory where you match the gold and silver ratio as closely as possible. If it is a 1:70, then own 1 oz of gold and 70 oz of silver and that can be extrapolated to 2:140 if someone chooses to do so.
    Your thoughts?
     
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  5. masterswimmer

    masterswimmer Well-Known Member


    Thanks CB.

    Silver and gold are both great conductors of electricity. They are both used as such in many facets of industrial equipment as well as in electronics.

    Very over simplified....Silver is a better overall conductor of electricity. Silver is often used in solder to create a good connection where there is typically a drop off in current due to the electrical splice.

    Gold is used very sparingly because of the obvious cost factor. Just about every cell phone uses gold. Printed circuit boards in computers use gold. Although silver is a better conductor than gold, gold is used in place of silver in the above applications (the much cheaper option) because of stability. Silver will tarnish. This will cause silver to lose some of its electrical conductivity over time.
     
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  6. masterswimmer

    masterswimmer Well-Known Member

    I wholeheartedly endorse and practice diversifying my portfolio. Unknowingly I probably have the exact ratio you describe. 1:70 sounds about right for my own portfolio. Not a conscious ratio on my part, just coincidental. Like I mentioned in my OP, gold is sexy damnit! lol
     
    CoinBlazer likes this.
  7. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    Welcome, Masterswimmer. Your arithmetic is spot on. And it is a fact, those of us that hold PM's do love the glimmer of silver and gold. I hold a reasonably hefty amount of PM's myself and have been storing gold since the early 1990's. If I were inclined to sell today, I would realize a nice return for most of my PM's.

    In the early 2000's about the time computers were standard office equipment, I kept live silver and gold tickers on my desktop. As time went on it became apparent that my PM holdings were becoming quite a stress in my life. Fortunately business was good to me and I came to view my PM holdings as they should be.... As a hobby. I still add to my silver and gold stacks, but have written them in my will to be disbursed among my kids and grandkids. I find I enjoy them much more knowing their futures lie in the hands of my kids.

    As I matured in business and in the hobby it became quite apparent to me that PM's are a very poor investment vehicle.Their futures are just too uncertain. PM's are fun money. Investments, not so much.
     
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  8. masterswimmer

    masterswimmer Well-Known Member

    Thanks Randy.

    I couldn't agree more about the 'investability' of PM's. I too have been accumulating for many decades. I have been buying 10oz silver bullion bars for each of the grandkids for their birthdays and holidays since they were born. Their cost is zero, so their returns will be better than mine :)

    I've been collecting coins for over five decades now. Never once sold a single coin. My collection will also be passed down to the kids. Just a small legacy of one of the hobbies their dad had a passion for. I've got other collectible hobbies in addition to coins. Hopefully they'll appreciate those as well.
     
    Randy Abercrombie likes this.
  9. CoinBlazer

    CoinBlazer Professional Teenager

    You better be posting up some pictures of your collection around here. We are sick of PMD zincolns, right @Randy Abercrombie ?
     
  10. EdThelorax

    EdThelorax Well-Known Member

    Silver is forming an enormous Cup and Handle charting pattern. A break above the long-term moving averages at $16.50 is needed to get it really moving.

    Gold is forming a huge Bull Pennant charting pattern. Breaking the highs of the last 5 years of $1350 should send it flying.

    The gold/silver ratio is near all-time highs. This ratio drops during every precious metals bull market. When it breaks below 80 the lower targets will come quickly.

    All Just My Humble Opinion.
    Ed

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  11. masterswimmer

    masterswimmer Well-Known Member

    lol, I'll have to dive into the vault to extricate some eye candy for all to see. Most of the collection is just accumulation. Nothing that will generate any marketable buzz. There are a few choice pieces though :D
     
    EdThelorax likes this.
  12. fretboard

    fretboard Defender of Old Coinage!

    Hey masterswimmer,
    Welcome to the forum! I've never ever thought of gold being sexy but you're right, it is sexy! :D
     
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  13. spirityoda

    spirityoda Coin Junky Supporter

    silver is cool and affordable. gold is nice, but I can only afford small 1/10th oz coins.
     
    slackaction1 likes this.
  14. masterswimmer

    masterswimmer Well-Known Member

    So inadvertently you've elected to go with the PM that has the biggest upside potential of the two. Nice work ;)
     
  15. Victor

    Victor Coin Collector

    Interesting topic
     
  16. spirityoda

    spirityoda Coin Junky Supporter

    I am buying both within my budget. 1 100 gram silver bar and 1 10th gold coin canadian oz. every other paycheck that is not rent check.
     
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  17. mpcusa

    mpcusa "Official C.T. TROLL SWEEPER"

    In a nut shell, Silver is the poor mans investment vehicle where as
    Gold is for the rich man..LOL all depends on the dollars you have to put in.
     
  18. masterswimmer

    masterswimmer Well-Known Member

    Percentage gain is impervious to which PM is in question. There is much more upside potential for silver. Gold is prettier to look at, but equal dollar investments should yield higher gains in silver. YMMV
     
  19. myownprivy

    myownprivy Well-Known Member

    However, premiums are higher per ounce on silver than on gold which cuts in substantially to that potential gain.

    Storage space for silver will be 85x greater than for an equal value of gold. You must account for that.
     
    spirityoda likes this.
  20. mpcusa

    mpcusa "Official C.T. TROLL SWEEPER"

    I agree, Gold is pretty to look at, i look at mine everyday ! :)

    I would have to disagree, Silver will never get back to its glory days
    Of $50 an OZ, so whats realistic ? i do have allot of 10 OZ Silver Bars
    Most are designer, but unless you have more then just bullion to
    Offer, i think it could get past maybe $23 but that,s it, just to much
    Of it around, its a simple matter of supply and demand. i think
    Gold has a potential to get back to its glory days of up around 2K
    With that said Gold i still think is under valued.
     
  21. mpcusa

    mpcusa "Official C.T. TROLL SWEEPER"

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