Switching silver to Gold?

Is it worth it if I change some of my silver to gold with the way prices are now?

 

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Just take a look at the gold to silver ratio and judge for yourself:

http://goldprice.org/gold-silver-ratio.html

(The gold to silver ratio is the number of ounces of silver you can buy for the cost of one ounce of gold. The higher the number, the more favorable it is to buy silver, or to move from gold to silver. The lower the number, the more favorable it is to buy gold, or to move from silver to gold.)

It took a hit these last few days, but it's still up there at 63.87. Just over two years ago, it dipped all the way down to 33. But when you look at the 36 year chart at the bottom of the page, 50 or 60 seems around average.

 

The ratio isn't really in your favor right now for a silver to gold trade. If you were looking to trade gold into silver now would be a good time to do so but not silver to gold currently imo.

 

Considering these are two very different markets, I do not put almost any weight into ratios. Both have their own separate supply/demand functions, and are affected by different degrees by psychology. If true supply/demand absent human emotions were at work, platinum would be 10 times more expensive than gold. Since its not, its proof they are not subject to normal supply/demand curves.

I buy whichever I am in the mood for. Silver is great since you can get a lot of coins for the money, but the downside to silver is its very bulky to put any "real" money into.

 

Faith or not, they are what they are, a comparison of the market value of two different goods. The price of silver and the price of gold, when expressed as $/Oz, are nothing more than ratios too, and there are forces that affect their values independently. If gold and silver weren't separate goods with their own supply and demand variables, then the historical graph would look a whole lot more stable (i.e. boring).

When people make a decision to exchange their dollars for PM, they usually check the $/oz ratio. If you're exchanging your PM for another type of PM, wouldn't it make sense to check the ratio first?

What they aren't, like any number or graph in and of itself, is a predictor of future values.

 

Yes sir, but you also know people always THINK they are predictors of future values, no? Just look at this thread, with people throwing out historical ratios, lows and highs. All well and good, except nothing is stopping the ratio from going to 100 to 1. Nothing at all. So while I agree 100% with your post, I am still protesting since I believe most who talk about the ratio do so in order to predict future price relationships.

 

Some might do that. But to me, checking the gold to silver ratio is largely the same as checking the dollar price of a commodity. I've read many of your posts where you say silver is too high and you're going to wait for it to come back down to a certain price point before you start buying again. If I have silver that I want to use to buy gold, I'll check the gold to silver ratio. Right now, it's a little too high for me to make that trade.

Can the gold to silver ratio go to 100? Sure it can. Can silver go to $5? Why not? Can silver go to $200? Who knows, but I'm sure you still check the spot price before buying, right?

 

It seems to me your argument would make sense if you view gold and silver as money. If you do not, you need to loop the greenback in as the reference point and not be concerned about the ratio.

For an example of why I don't like looking at the ratio, lets just take a look at Rhodium. Certainly the Rhodium/Gold ratio is much much lower that it was in the not too distant past. Different market/supply conditions exist now and changed the ratio. I don't think a case to buy Rhodium based on the Rhodium/Gold ratio would make much sense. You need to look at the market condition as is the case with Gold and Silver

 

It almost seems like you're saying if I "loop the greenback in" then I don't need to check the market conditions on gold and silver. Otherwise, your recommendation doesn't make much sense.

ETA: When you look at the gold to silver ratio, the dollar is already in the equation...

 

My best advice to you is to watch the market, do some research, and try to analyze the market for yourself. Don't listen to the so called experts writing articles. I read an article written about eight months ago on gold and silver futures. The author made no mention of any possibility of silver taking a tumble under $20. It actually hinted mote towards $75-$100 silver.
I personally have been watching silver (because gold is out of my price range), and decided to stop buying silver (other than numismatic coins) at $32, betting it would fall. I didn't expect it to fall this soon, this fast; but I was on the right track.
My next point is, buy and sell gold when the time is right, and do the same for silver. It doesn't have to be on the same day either. You may find another investment opportunity in between.

 

You'll have to define more factors that influence such a transaction as pertains to your personal investment and if changing from one metal to another is worth it. There's a bit more to such a transaction than what current spot prices are trading at. Namely, how much did the amount of silver you want to change into gold, cost you in the first place? That is, what was the total cost then and what is the total number of ounces of silver you may want to change into gold. Have you 'earned' on your investment to date?

Do some math on your investment to see where it currently stands. Subtract your initial investment costs, and any fees or storage costs (e.g. you bought a safe, installed a home security system, are paying rent on an safe deposit box, adopted and feed an angry and noisy hound, etc.)

Also, think in terms of the amount of gold the current ounces of silver you hold could get you IF you didn't have that silver to work with. Could the current value of silver you have amount to a cash value you have available and ready to invest in gold at its current prices? If you want to be in gold, would it be more wise to hold the silver and invest more of the cash you have in hand, especially if you would be taking a loss in what the silver cost you, that is, if you'd bought silver at a higher spot price than it is now trading for.

Get a calculator, a pencil and some paper and go over the numbers... You may figure out which path to take without enduring an debate on dollar:gold ratios that are currently not answering your question(s). Think in terms of what ease you may or may not have, trading or selling one PM over another should you need to liquidated and return to cash someday. Has the silver investment done what you wanted it to do, and can gold do (continue) that too, or do something else you want it to do for you? If you're just feeling anxious about it, do the math on paper and do nothing else with your silver for now. Come back in a few weeks or months and see how PMs are doing then. Don't feel rushed to make a decision as the perspective of time can teach you a lot, too.

It's really a personal thing that takes your own unique factors and perspective to determine how, and when, to best proceed.

Regards. :thumb:

 

What ever you Do To stay of the IRS radar buy only $9999.00 so 1099 Form Must be issued:devil:

 

I assume you mean or a 1099 must be issued for purchases above $10,000. Does that apply to a single purchase or total purchases for a calendar year from a vendor? What about sales at what point are 1099s issued?

 

Right now its per transaction. However, anyone is required to report if it seems you are systematically trying to get around those rules. Go into a bank 3 days in a row and take out $9,000 and the bank should report the transactions, since it appears you are trying to skirt the $10,000 reporting limit. Same with coin dealers, though I am pretty sure most will not be as diligent as a bank would be.

 

I thought banks now reported $5K transactions.

 

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Form-8300-and-Reporting-Cash-Payments-of-Over-$10,000

Form 8300 must be filled out by any business that takes in $10,000 in cash or cash equivalent, IE money orders and cash of $10,000 or more, or any activity that may be deemed suspicious. The business is just as guilty if they coach them in how to get around the rules, etc....

 

I am confused about how this applies to purchases unless where are saying buying say a car or home with cash is also suspicious. Does it exclude credit card transactions?

 

I posted a video to discuss the ratio for trading silver for gold, I would love to see what people think, take a look.

https://www.youtube.com/watch?v=5GGAxiCilmk

 

Buying a car with cash over $10,000 must be reported, or even a down payment in cash above $10,000 must be reported. As an example, if you were to take in a $6000 money order and $4000 in cash, it must be reported. The other thing you must report is if you deem a transaction as being suspicious, like the person you're taking the large amount of cash from asks questions about the limit for cash payment, etc.

Yes, it does not apply to transactions over $10,000 that are paid by credit card or check. Those transactions have a digital record, it's only cash or cash equivalent.

 

Quick history of silver to gold ratio on a time line.

http://seekingalpha.com/article/422081-324-years-of-the-gold-to-silver-ratio-and-195-silver

1840 - 15:1
1900 - 31:1
1920 - 31:1 No change in 20 years
1940 - 97:1 World War 2
1960 - 38:1
1970 - 22:1 lowest since 1840 - what was going on in 1970 for the ratio to be so low?
1980 - 37:1
1990 - 94:1 Why so high?
2000 - 56:1
2010 - 60:1
2020 - ?:? where will we be?