Gold / Silver Ratio

[superhero]

On "Favorite place to buy PMs", benjamen said:

Each month when I go to make a purchase it is narrowed down by 3 things:
1) Which metal do I want to buy
2) What form of that metal (bars, coins, ect)
3) Who can give me the best deal (Local store, online vendor, ect)

Didn't quite know what he meant so I kept reading and saw reference to gold/silver price ratios.

I couldn't find a readily available chart, so I went to Kitco's site to gold and silver spot pricing from June 2002 to today (in quarterly increments first, the more frequently later) and plotted a chart to see the gold/silver ratio. The ratio has swung wildly with gold/ratio being ~80 in December 2008, down to ~40 in March 2011.

So I'm assuming when the ratio is high, buy silver. Ratio is low, buy gold. Is that correct?

PS, In case anyone is interested in plotting their own chart, here's the data...


Date Gold Silver Ratio

2002-06-01 $326.30 $5.01 65.13
2002-09-01 $312.30 $4.43 70.50
2002-12-01 $318.70 $4.42 72.10
2003-03-01 $349.60 $4.59 76.17
2003-06-01 $396.10 $6.70 59.12
2003-09-01 $375.30 $5.10 73.59
2003-12-01 $398.10 $5.33 74.69
2004-03-01 $396.10 $6.70 59.12
2004-06-01 $390.60 $5.78 67.58
2004-09-01 $400.00 $6.54 61.16
2004-12-01 $455.20 $7.99 56.97
2005-03-01 $433.60 $7.34 59.07
2005-06-01 $423.10 $7.49 56.49
2005-09-01 $442.80 $6.97 63.53
2005-12-01 $502.90 $8.55 58.82
2006-03-01 $565.80 $10.18 55.58
2006-06-01 $636.80 $12.10 52.63
2006-09-01 $624.40 $12.92 48.33
2006-12-01 $645.10 $13.97 46.18
2007-03-01 $640.80 $12.82 49.98
2007-06-01 $670.60 $13.69 48.98
2007-09-01 $673.20 $12.02 56.01
2007-12-01 $783.10 $13.98 56.02
2008-03-01 $974.30 $19.81 49.18
2008-06-01 $886.10 $16.87 52.53
2008-09-01 $829.80 $13.59 61.06
2008-12-01 $816.30 $10.26 79.56
2009-03-01 $939.60 $13.11 71.67
2009-06-01 $979.60 $15.79 62.04
2009-09-01 $994.50 $16.22 61.31
2009-12-01 $1,161.30 $18.47 62.87
2010-03-01 $1,116.60 $16.44 67.92
2010-06-01 $1,220.00 $17.41 70.07
2010-09-01 $1,246.60 $19.85 62.80
2010-12-01 $1,414.50 $29.38 48.14
2011-03-01 $1,432.80 $35.67 40.17
2011-06-01 $1,542.40 $36.29 42.50
2011-09-01 $1,884.20 $43.25 43.57
2011-09-15 $1,812.50 $40.66 44.58
2011-10-01 $1,624.80 $29.97 54.21
2011-10-15 $1,679.80 $32.16 52.23
2011-11-01 $1,754.00 $34.13 51.39
2011-11-15 $1,724.80 $32.41 53.22
2011-12-01 $1,745.30 $32.64 53.47
2011-12-15 $1,599.20 $29.74 53.77
2012-01-01 $1,566.40 $28.54 54.88
2012-01-15 $1,639.70 $29.77 55.08
2012-02-01 $1,725.90 $33.67 51.26
2012-02-15 $1,723.80 $33.28 51.80
2012-03-01 $1,711.00 $34.73 49.27
2012-03-15 $1,657.30 $32.54 50.93
2012-04-01 $1,677.00 $32.99 50.83
2012-04-15 $1,652.90 $31.52 52.44
2012-05-01 $1,653.70 $30.65 53.95
2012-05-15 $1,544.30 $27.72 55.71
2012-06-01 $1,625.90 $28.56 56.93
2012-06-08 $1,595.27 $28.64 55.70

 

[ancona]

Nice info SH. You are correct with the high low ratio assumption.

 

[benjamen]

http://www.pmbug.com/forum/f13/how-select-metal-buy-sell-703/?

The above is an old thread about how I personally look at ratios.

 

[Jetstream]

As long as there is blatant manipulation of the PM market, I'm not sure if the G/S ratio is all that significant.
It is not a 'natural' ratio at all. That means it has been rigged to be as it stands.

 

[benjamen]

Article on the subject of gold/silver and gold/platinum ratios:
http://seekingalpha.com/article/658611-precious-metals-are-on-sale-or-are-they

His strategy:
"Platinum
Hoard when 0.7 - 0.8 oz. gold buys 1 oz. platinum
Accumulate when 0.8 - 0.9 oz. gold buys 1 oz. platinum
Hold when 0.9 - 1.4 oz. gold buys 1 oz. platinum
Swap when 1.5 - 1.75 oz. gold buys 1 oz. platinum
Liquidate when 1.75+ oz. gold buys 1 oz. platinum

Silver
Hoard when 63+ oz. silver buys 1 oz. gold
Accumulate when 57 - 62 oz. silver buys 1 oz. gold
Hold when 34 - 56 oz. silver buys 1 oz. gold
Swap when 20 - 33 oz. silver buys 1 oz. gold
Liquidate when 19 or less oz. silver buys 1 oz. gold"

 

[superhero]

The GSr is above 57 now. Is it time to accumulate?

 

[69mach351]

The GSr is above 57 now. Is it time to accumulate?

That s how I took it

 

[pmbug]

The GSr is above 57 now. Is it time to accumulate?

Silver appear cheap to me (compared to gold).

 

[superhero]

The GSr was at 58.4 Friday afternoon.

I'm ready to accumulate more PMs, and am hesitant on buying any gold because it's so expensive compared to silver.

OTOH, an oz of gold is easier to carry / hide compared to 58 oz of silver (though 58 oz of silver is way more satisfying to look at or play with).

For those who buy both gold and silver. Are you buying gold lately? Or sticking with silver for now?

 

[benjamen]

The GSr was at 58.4 Friday afternoon.

I'm ready to accumulate more PMs, and am hesitant on buying any gold because it's so expensive compared to silver.

OTOH, an oz of gold is easier to carry / hide compared to 58 oz of silver (though 58 oz of silver is way more satisfying to look at or play with).

For those who buy both gold and silver. Are you buying gold lately? Or sticking with silver for now?

Having just completed a goal for silver, I am leaning towards Platinum at the moment. Like gold, it is much easier to move that silver, but right now the ratio to gold is way out of the normal range.
$.02

 

[pmbug]

Silver appears to be making some moves relative to gold. GSR was down to 56 earlier this morning.

 

[pmbug]

Ratio is roughly 54 and a half this morning. Silver still moving...

 

[pmbug]

Under 54 today...

 

[pmbug]

Under 53 today ...

 

[pmbug]

Under 52 today ...

 

[pmbug]

GSR is right at 51.33 this morning. Finally got back to where it was almost 3 months ago.

 

[swissaustrian]

Looks like we might have a head and shoulders formation here with early 2012 beeing the left shoulder, summer 2012 the head and right now the right shoulder.

 

[swissaustrian]

The GSR is at a key point arround 60. Either silver gets something going in terms of outperformance against gold or we're at 65 in a hurry. Short terms silver is oversold relative to gold. It seems like the weak copper market is holding silver down. If we get an intense slowdown in the economy, this trend is going to continue. So what I'm saying is: Beware silver bulls. There might be more trouble ahead, even with silver trading below production costs.

 

[pmbug]

That may be so for the paper market, but a "physical GSR" looks a bit different right now. Premiums on physical silver are running 20-30% while premiums on gold have stayed steady.

 

[swissaustrian]

Yes that's a very good point. We need to watch that, too.

 

[pmbug]

No sooner do I post that than I see premiums for gold rise 50%.

 

[superhero]

With GSR at ~65, I "should" be hoarding silver right?

But I'm becoming reluctant to buy silver because of it's so volatile relative to gold; and to a letter lesser extent, because it's just so damn heavy (easier to carry 1 oz of gold than 65 oz of silver).

Is anyone disregarding the GSR and buying gold instead of silver at this time?


Edit: lesser, not letter

 

[benjamen]

With GSR at ~65, I "should" be hoarding silver right?

But I'm becoming reluctant to buy silver because of it's so volatile relative to gold; and to a letter extent, because it's just so damn heavy (easier to carry 1 oz of gold than 65 oz of silver).

Is anyone disregarding the GSR and buying gold instead of silver at this time?

More and more I pay attention to the GSR adjusted for premiums.

Example: spending a few thousand dollars on one ounce Gold versus Silver Eagles
http://www.apmex.com/product/71271/2013-1-oz-gold-american-eagle-brand-new
$1,361.59 (1-9 range)
http://www.apmex.com/product/72459/2013-1-oz-silver-american-eagle
$23.47 (100-499 range)

This gives you a ratio of 58:1

I do agree with you that moving a large amount of silver is much harder then the equivalent in gold or platinum.
I discussed the issues of transporting a large amount of wealth in physical silver here:
http://www.pmbug.com/forum/f3/stack-transport-1186/

 

[Aubuy]

If you are investing in alternatives to cash I believe gold makes far more sense because it is obviously more rare. Silver is far too common, inexpensive per ounce, and it tarnishes. It's not even good for silverware because it takes so much work to polish and I've got some silverplate serving pieces worth about 10 cents on the dollar now. I wouldn't toss my silver coins but I would swap silver and start going for the gold. I think over long time horizons you are going to do much better there.

 

[Jay]

If you are investing in alternatives to cash I believe gold makes far more sense because it is obviously more rare. Silver is far too common, inexpensive per ounce, and it tarnishes. It's not even good for silverware because it takes so much work to polish and I've got some silverplate serving pieces worth about 10 cents on the dollar now. I wouldn't toss my silver coins but I would swap silver and start going for the gold. I think over long time horizons you are going to do much better there.

OK, I'm curious. Why so many articles on how actual phyz silver is more rare than actual phyz gold (because it is consumed in industry, thrown in the dump in electronics, etc.)?

typing this query into Google I get 7,220,000 results. here is the first:
http://www.thewisdomjournal.com/Blog/investment-silver-is-even-more-scarce-than-gold/

 

[Aubuy]

I am no expert. I would just have more confidence in gold if I have to trade for something essential and everybody else was offering silver.

 

[Jay]

I am no expert. I would just have more confidence in gold if I have to trade for something essential and everybody else was offering silver.

fair enough. I can't afford gold, but I'm quickly accumulating a huge pile of silver; because of the problems inherent if I have to move quickly it looks like I need to trade some of it for gold, but I would rather the GSR be much much tighter. Also, since man has worked for the equivalent of one dimes worth of silver for a days labor through ALMOST all of recorded history, I'm thinking silver will be better for barter in a grid-down situation (if you can protect it!).

 

[Aubuy]

fair enough. I can't afford gold, but I'm quickly accumulating a huge pile of silver; because of the problems inherent if I have to move quickly it looks like I need to trade some of it for gold, but I would rather the GSR be much much tighter. Also, since man has worked for the equivalent of one dimes worth of silver for a days labor through ALMOST all of recorded history, I'm thinking silver will be better for barter in a grid-down situation (if you can protect it!).

If you've got some silver coins that can also act as legal tender you will be in far better shape than most, particulary when the internet goes down because some 20 year old at the NSA hits the wrong button (oops I thought I was playing Galactic Warrior) and suddenly everyone's credit card is worthless. :sad$: