Silver Will Never Be Valuable

My take on the wildly varied silver to gold ratio is wherever you see such variability, there is the potential for profit.

Does the GSR make sense? Yes, in that gold and silver are related in many regards, thus it makes as much sense as the gold to dollar or the silver to dollar ratio, which most bullion people follow, and much more sense than the lesser known gold to corn flakes ratio.

Where I think it makes the most sense is for a person that has ample quantities of both metals on hand and their long term goal is to maximize the amount of precious metals they have on hand. When the ratio is higher than average, then trade (sell) gold in favor of silver. When the ratio is lower than average, then trade (sell) silver in favor of gold. Especially if one can do so while avoiding premiums, or better yet, charging premiums. One good thing about using the GSR to trade between gold and silver is that it simplifies things by completely ignoring inflation.

Also, it is possible for silver to be "consumed". Not literally of course, but relatively speaking. When they produce socks with nanoparticles of silver in them to prevent athletes' foot, do you really think that silver is going to be recovered and recycled anytime in the near future? What about all the silver plated jewelry? How about all the toys that have microprocessors today? Are all of them going to be recycled as ewaste? Silver in bandages, creams, and ointments? Pressure treated wood? There is a long list of products that contain such small quantities of silver that recovering that silver is impractical at best, but these applications are essentially "consuming" large quantities of silver on the global scale.

 

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http://www.sciencedaily.com/releases/2008/04/080406175050.htm

And I would look for citations on the use of "large quantities on a global scale"

 

My only warning on such a strategy would be, "how well would this strategy have worked out?" The GSR used to be 16-1, if you do as you propose those people would only have silver today, and gold today is WAY more valuable. So basically anyone following this strategy would have got their butt handed to them over the last 40 years.

If anyone wishes to use a ratio, then by gosh they better know what is means and WHY the ratio should be relevant. In the old days, it was relevant since most pm demand was from countries that valued them both. Also, byproduct silver production was much lower than today, with modern societies need for massive amounts of copper and tin.

My view today is much of the gold demand is from societies that do not value silver nearly as much as gold, and hundreds of millions more ounces of silver are hitting the market each year due to byproduct production. So, we have a situation of higher and higher gold ONLY demand, while we have higher and higher byproduct silver production. So, it completely makes sense why the ratio is skewing towards gold. Will it correct? Maybe, but not because of historical reasons, only due to new reasons. Or, it could just keep growing and growing.

This is the only prudent analysis of the GSR in my view. If you disagree with some points, fine, we can discuss, but this backdrop I feel is a very strong case for high GSR going forward. Maybe we predict collapsing copper demand, which will drive silver up, or collapsing Asian demand for gold. Anything is possible, I just think such a framework is the framework most appropriate to discuss the scenarios, not what happened 100 years ago.

 

Agreed.

I look 20 years back, at most, to figure out if the ratio is high or low. It's difficult to determine the exact average, but looking at a chart, it seems to be in the 50-60 neighborhood:



If I had a stack of silver in 2011, I would have been selling/trading for gold.

I'm also not necessarily talking about selling all of one to buy another, but rather selling/trading/buying a bit here and there when you can work the premium in your favor. (craigslist, yard sales, etc..)

I only started buying PM in 2012, so it's always been silver for me. I've bought a little bit of gold here and there, but measured in dollars, I have about 90% silver and 10% gold. If the GSR goes below 60, I'll start looking more for opportunities to sell silver at a premium and buy gold at a discount. At 50, the premiums and discounts might be less important. At 40, the premiums and discounts might be irrelevant.

All of this depends of course on what is causing the values to change.

 

Eh, wait until you have been buying for 30+ years. You will be where I am, forced to buy more gold and less silver just to be able to shoehorn it into the sdb. I love silver, but I am afraid I have to either buy a safe or another SDB to buy anymore at this point.

 

As far as GSR, I don't see why it couldn't be anything since it's based on prices (which are free to move independently).

I find other ratios more interesting (like the mining ratio, physical above ground stock, coin/bullion ratio, etc) and have no problems buying/holding some silver.
No expectations for future prices (not investing)... just a little hard asset piece of mind in a confusing paper world.

 

Sorry, I didn't see your post earlier.

I can't find any reliable sources for the amount of silver used globally for these various applications where the silver wouldn't be readily recoverable, but it certainly happens. From the article you posted, there is enough silver being washed out of socks to possibly pose an environmental concern.

Even if each pair of socks, or each piece of pressure treated lumber, or each electronic toy, or each tube of antibacterial ointment contains 1/10,000th of an ounce of silver, that would add up quick.

There are roughly 70 million Pieces of 2"x4"x8' pressure treated lumber produced per year, or about one for every hundred people on the planet per year. Let's estimate that only one in ten is treated using a compound that contains silver. If there's even 1/10,000th of an ounce of silver being used to treat each piece, then a very conservative estimate would be 7,000 ounces of silver per year, just to treat 2"x4"x8' lumber, that are essentially unrecoverable.

 

Well silver is being used as an industrial metal more and more...lets just not loose sight that it IS a monetary metal also..

 

Where.........

 

Why, only the most progressive and forward-thinking political entities...

 

That is funny ISIS...hmm....well I guess they do not want to be tied to the swift system either. Why would you and your sovereignty over to your enemy?

Say what you will, but it is not a stupid idea, Mexico is considering re-monetizing silver as they have a lot of it.

Paper is Paper - even the Roman soldiers wanted paid in Gold...

 

But it's more than paper: "...paper is a mortgage on wealth backed by a gun aimed at those expected to produce it..." Atlas Shrugged
Root of money speech

 

Silver seems to have some value still. Why is it going straight up today? It's up about a buck since 11 or so. Anyone have any insight?

 

That would surely be because I was hoping to bargain-hunt at this weekend's local show.

The last time I'd checked was earlier this morning, when it was down around $15.30, a new low for the move. Now everybody will have their sell prices jacked up, but it's still too low for me to have much desire to sell anything off. I don't know -- if the spike goes higher, maybe I will sell a bit into it.

 

The price always seems to go up when I want to buy, then down when I want to sell. The price of the physical silver hasn't gone down as much as the paper price. I have found some at 14x face, but I couldn't get it any cheaper.

 

Then if you think this is the bottom, buy the paper. Once premiums go back to normal sell the paper to fund physical purchases. Physical premiums always spike on price downturns.

 

I did buy some paper silver, but when it was $17, so I hope it goes back over that soon, so I can stop kicking myself!

 

That was widely reported back in 2011 when the effects of QE were suspect, but since, it seems to just be a few headed by Salinas, a mexican billionaire who can't be said to worry much about anyone other than his business partners. Then he was hoping the USD wasn't the reserve currency and silver could be manipulated more under the BRIC proposals. As long as PM are traded on USD basis, it make no sense for any reasonable 'nation' to use a PM basis.IMO.

https://www.google.com/url?sa=t&rct...OXEMVU7PSYBKN_KJRpvZjxg&bvm=bv.79400599,d.cGU

Didn't the romans work for salt?

 

My understanding was that when the emperors started using less pure silver in the coinage the soldiers demanded to be paid in Gold only. The denarius was debased..

 

I haven't heard that. Other nations who got paid not to invade demanded pure gold, which is why for most of its history the gold coins were never debased.

Regarding working for salt, workers and soldiers were given money for "salt", (meaning basic necessities), called a salarium, the basis for the word salary. But they were also paid wages. Sometimes, when the coins got debased, soldiers were actually paid rations of commodities each month so that they were not as affected by the inflation being generated by the decreasing purity of the coins.