7 Reasons Why Silver Investments Look Better Than Gold
Contributed in part by: Ben Kramer-Miller
So, while many are big into gold, I have always preferred Silver. Many other investors agree. I use the word investor loosely. While many buy precious metals for investment purposes, you all know my main 4 reasons for buying metals.
1. Insurance: (Against inflation and supplement income)
2. Reduce debt / Buy goods at a discount
3. Economic recession / fiat currency crash
4. Economic armageddon: (Prepper purposes) Temporary money replacement
So, why have I always preferred silver over gold? Here are 7 reasons that Ben has listed quite accurately. I have altered it slightly to update current ratios and statistics. I've also added a couple of my own additional reasons at the end.
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1. One ounce of gold is currently 77.5 times more expensive than one ounce of silver. However silver reserves (i.e. the amount of silver that mining companies estimate they can extract from the ground) only outnumber gold reserve by a factor of 10.6. Thus, it stands to reason that the gold/silver ratio should be closer to 10.6:1 than 77.5:1. With gold trading at $1,090/ounce, this should put the silver price at $102.83.
2. In 2012, total gold production from mining equaled 2,700 tonnes. Silver production reached 24,400 tonnes — a figure that is just 9 times greater. From this, it stands to reason that the gold/silver ratio should be closer to about 9:1, which, with gold trading at $1,090/ounce, would put silver at $121/ounce.
3. Most of the gold that is produced is hoarded — only about 400 tonnes goes toward industrial production. More than half of the silver produced — over 14,000 tonnes — goes towards industrial production, and this figure is growing. Trace amounts of silver can be found in virtually every modern-day electronic device, including growing markets such as smart phones and tablets. Silver is also used in the medical fields. Furthermore, it is a crucial element in manufacturing photovoltaic cells that are used in solar panels. Because the amount of silver that goes into these devices is generally very small recycling is not economical at the current silver price. Further, producers of these products use so little silver per unit that they can withstand a substantial price increase.
4. Many mining companies that focus on silver production simply cannot make a profit at the current silver price. Companies from Pan American Silver (NASDAQ:PAAS) to Silver Standard Resources (NASDAQ:SSRI) have shown operating losses in this low silver price environment. It stands to reason that if the silver price remains low these companies and many of their peers will cease their operations, and this will limit the supply. On the other hand, while there are exceptions, many of the major gold mining companies can turn operating profits at the current gold price. Furthermore, even if this weren’t the case, because gold is hoarded the gold price is less sensitive to mine output than it is to the silver price.
5. Silver is more appealing to small investors than gold. I can walk into a coin shop with $1,000 and walk out with at least 60 ounces of silver (depending on which coins I buy). I can’t even buy one ounce of gold with that amount. The simple fact that investors can walk out of a coin shop with so much silver makes it far more psychologically satisfying to own.
6. Historically, silver has moved farther and faster than gold in percentage terms. For example since their 2011 peaks silver is down over 50 percent whereas gold is down just over 35 percent. Additionally, in the 1970’s bull markets in silver and gold silver rose 38-fold while gold rose 25-fold. Therefore if you believe that precious metals are going to turn higher in the near future, as I believe that they will, silver should outperform.
7. There is a long history of gold confiscation and restrictions on purchasing or importing gold, and investors may choose silver out of fear that this history could be repeated. For example, in 1934 President Roosevelt signed the Gold Reserve Act which made it illegal for Americans to own gold bullion. This legislation wasn’t rescinded until 1974. For a modern example we can look to India. The Indian government has levied a tariff on gold imports, and while it has backed off somewhat recently the high tariff may lead some Indians to favor silver.
MY EXTRA COUPLE REASONS TO PREFER SILVER OVER GOLD!!!
8. Assuming you buy silver for one of my main 4 reasons above, should the price of precious metals go up considerable and you are going to trade in some to supplement your income because of inflation, or a crash in fiat currency, you can stay under the radar with silver. What do I mean? Lets say gold is at $5,000 and silver is at $100. Rules may be put in place whereby exchanging large amounts of cash; e.g. $5,000 is reported to the authorities. That could simply be one ounce of gold. On the other hand, you could sell back a few ounces of silver, more often, like once a week, and only be trading hundreds of dollars. Much less recognized.
9. Let's assume the prepper situation kicks in with a total economic Armageddon and fiat currency isn't really worth anything. Precious metals could be used again temporarily as "Money". It could also be used for bartering. Even if Gold is at $5,000 and Silver is at $100 an ounce, it's a lot easier to purchase milk, bread, food, water, and other necessities with silver. It would be pretty difficult buying a couple hundred dollars worth of supplies with an ounce of gold, and asking: "CAN YOU MAKE CHANGE". See what I'm saying?
10. If you are using precious metals to supplement your income during retirement say; e.g. You have 1000 ounces of silver, it's value is at $100 an ounce, that's $100,000. You could cash out 3 ounces of silver per month to supplement your income with an additional $300 per month for almost 30 years. $500 (5 ounces of silver) per month for 20 years. That $300-$500 per month would be a very good monthly supplement to cover many living expenses so you aren't on a restricted "Fixed Income". If you use gold, you will have LARGER amounts at one time. e.g. $5000 an ounce. Technically, that can cover you for 10-15 months, ($300-$500), but the price can fluctuate a lot in a year. With silver, you can make decisions monthly on how much to exchange, vs yearly. Exchanging monthly vs yearly allows you to make better financial decisions. And, you won't be tempted to spend the extra money that you're holding onto that is suppose to last you. Because when you exchange $5000 worth of gold, you don't want to put that money into the bank. You're ON THE RADAR AGAIN. Exchange it as you need it.
Anyway; I hope this list gives you some good reasons to prefer silver over gold. The biggest thing to realize is; silver is way under valued vs gold. Some same, Gold is over valued and that silver could remain flat in value and gold needs to come down. I don't agree. I believe that gold is about where it should be (In today's dollars), and that it's silver that should be higher. In today's dollars, I think gold should be close to the $1200 an ounce mark, and silver should be at the $35 an ounce mark. (35:1 ratio). And gold and silver have maintained their purchasing power for thousands of years. So right now, silver is way under priced. An ounce of silver SHOULD be able to buy a person a nice dinner. $14 is not a nice dinner for one. (Only fast food). $30-$35 is a nice dinner for one. This is one of the reasons listed above why you should be buying silver vs gold. Silver is going to go back up at a greater rate than gold. Gold currently does buy what it historically could with an ounce.
While I definitely own BOTH silver AND gold, I will tell you one thing. IF, the gold to silver ratio his 80:1 (Currently it's at 77:1), and that means gold is say $1150 and silver is $14.38, I will be VERY TEMPTED to trade in ALL my gold for silver. Across the board, say I trade 10 ounces of gold, that would be 800 ounces of silver. Then, if the ratio got back down to say 70:1, ($1150 gold and $16.43 for silver), I'd trade back 700 ounces of silver for the 10 ounces of gold, and I have 100 ounces of silver REMAINING as pure profit. Matter of fact, probably HALF of my silver I have on hand currently, is set aside specifically for transfer purposes. Half of what I own is for the 4 reasons I specified initially above; but the other half of my silver is designed to transfer BACK TO GOLD when the ratio gets back to 60, 50, 40, or 30:1. Remember the peak of 2011??? Gold was close to $1900. Silver was right at $50. That's a 38:1 ratio. If I traded 10 ounces of gold for silver TODAY; I'd get 770 ounces of silver. If I traded it back at 38:1, that's right at HALF. I'd get the 10 ounces of gold back, but it would only cost me 380 ounces of silver. I'd have 380 ounces of silver as PROFIT!!!
Anyway; hope this gets you thinking. Take care:
CYA: SE:
So, while many are big into gold, I have always preferred Silver. Many other investors agree. I use the word investor loosely. While many buy precious metals for investment purposes, you all know my main 4 reasons for buying metals.
1. Insurance: (Against inflation and supplement income)
2. Reduce debt / Buy goods at a discount
3. Economic recession / fiat currency crash
4. Economic armageddon: (Prepper purposes) Temporary money replacement
So, why have I always preferred silver over gold? Here are 7 reasons that Ben has listed quite accurately. I have altered it slightly to update current ratios and statistics. I've also added a couple of my own additional reasons at the end.
**********************************************
1. One ounce of gold is currently 77.5 times more expensive than one ounce of silver. However silver reserves (i.e. the amount of silver that mining companies estimate they can extract from the ground) only outnumber gold reserve by a factor of 10.6. Thus, it stands to reason that the gold/silver ratio should be closer to 10.6:1 than 77.5:1. With gold trading at $1,090/ounce, this should put the silver price at $102.83.
2. In 2012, total gold production from mining equaled 2,700 tonnes. Silver production reached 24,400 tonnes — a figure that is just 9 times greater. From this, it stands to reason that the gold/silver ratio should be closer to about 9:1, which, with gold trading at $1,090/ounce, would put silver at $121/ounce.
3. Most of the gold that is produced is hoarded — only about 400 tonnes goes toward industrial production. More than half of the silver produced — over 14,000 tonnes — goes towards industrial production, and this figure is growing. Trace amounts of silver can be found in virtually every modern-day electronic device, including growing markets such as smart phones and tablets. Silver is also used in the medical fields. Furthermore, it is a crucial element in manufacturing photovoltaic cells that are used in solar panels. Because the amount of silver that goes into these devices is generally very small recycling is not economical at the current silver price. Further, producers of these products use so little silver per unit that they can withstand a substantial price increase.
4. Many mining companies that focus on silver production simply cannot make a profit at the current silver price. Companies from Pan American Silver (NASDAQ:PAAS) to Silver Standard Resources (NASDAQ:SSRI) have shown operating losses in this low silver price environment. It stands to reason that if the silver price remains low these companies and many of their peers will cease their operations, and this will limit the supply. On the other hand, while there are exceptions, many of the major gold mining companies can turn operating profits at the current gold price. Furthermore, even if this weren’t the case, because gold is hoarded the gold price is less sensitive to mine output than it is to the silver price.
5. Silver is more appealing to small investors than gold. I can walk into a coin shop with $1,000 and walk out with at least 60 ounces of silver (depending on which coins I buy). I can’t even buy one ounce of gold with that amount. The simple fact that investors can walk out of a coin shop with so much silver makes it far more psychologically satisfying to own.
6. Historically, silver has moved farther and faster than gold in percentage terms. For example since their 2011 peaks silver is down over 50 percent whereas gold is down just over 35 percent. Additionally, in the 1970’s bull markets in silver and gold silver rose 38-fold while gold rose 25-fold. Therefore if you believe that precious metals are going to turn higher in the near future, as I believe that they will, silver should outperform.
7. There is a long history of gold confiscation and restrictions on purchasing or importing gold, and investors may choose silver out of fear that this history could be repeated. For example, in 1934 President Roosevelt signed the Gold Reserve Act which made it illegal for Americans to own gold bullion. This legislation wasn’t rescinded until 1974. For a modern example we can look to India. The Indian government has levied a tariff on gold imports, and while it has backed off somewhat recently the high tariff may lead some Indians to favor silver.
MY EXTRA COUPLE REASONS TO PREFER SILVER OVER GOLD!!!
8. Assuming you buy silver for one of my main 4 reasons above, should the price of precious metals go up considerable and you are going to trade in some to supplement your income because of inflation, or a crash in fiat currency, you can stay under the radar with silver. What do I mean? Lets say gold is at $5,000 and silver is at $100. Rules may be put in place whereby exchanging large amounts of cash; e.g. $5,000 is reported to the authorities. That could simply be one ounce of gold. On the other hand, you could sell back a few ounces of silver, more often, like once a week, and only be trading hundreds of dollars. Much less recognized.
9. Let's assume the prepper situation kicks in with a total economic Armageddon and fiat currency isn't really worth anything. Precious metals could be used again temporarily as "Money". It could also be used for bartering. Even if Gold is at $5,000 and Silver is at $100 an ounce, it's a lot easier to purchase milk, bread, food, water, and other necessities with silver. It would be pretty difficult buying a couple hundred dollars worth of supplies with an ounce of gold, and asking: "CAN YOU MAKE CHANGE". See what I'm saying?
10. If you are using precious metals to supplement your income during retirement say; e.g. You have 1000 ounces of silver, it's value is at $100 an ounce, that's $100,000. You could cash out 3 ounces of silver per month to supplement your income with an additional $300 per month for almost 30 years. $500 (5 ounces of silver) per month for 20 years. That $300-$500 per month would be a very good monthly supplement to cover many living expenses so you aren't on a restricted "Fixed Income". If you use gold, you will have LARGER amounts at one time. e.g. $5000 an ounce. Technically, that can cover you for 10-15 months, ($300-$500), but the price can fluctuate a lot in a year. With silver, you can make decisions monthly on how much to exchange, vs yearly. Exchanging monthly vs yearly allows you to make better financial decisions. And, you won't be tempted to spend the extra money that you're holding onto that is suppose to last you. Because when you exchange $5000 worth of gold, you don't want to put that money into the bank. You're ON THE RADAR AGAIN. Exchange it as you need it.
Anyway; I hope this list gives you some good reasons to prefer silver over gold. The biggest thing to realize is; silver is way under valued vs gold. Some same, Gold is over valued and that silver could remain flat in value and gold needs to come down. I don't agree. I believe that gold is about where it should be (In today's dollars), and that it's silver that should be higher. In today's dollars, I think gold should be close to the $1200 an ounce mark, and silver should be at the $35 an ounce mark. (35:1 ratio). And gold and silver have maintained their purchasing power for thousands of years. So right now, silver is way under priced. An ounce of silver SHOULD be able to buy a person a nice dinner. $14 is not a nice dinner for one. (Only fast food). $30-$35 is a nice dinner for one. This is one of the reasons listed above why you should be buying silver vs gold. Silver is going to go back up at a greater rate than gold. Gold currently does buy what it historically could with an ounce.
While I definitely own BOTH silver AND gold, I will tell you one thing. IF, the gold to silver ratio his 80:1 (Currently it's at 77:1), and that means gold is say $1150 and silver is $14.38, I will be VERY TEMPTED to trade in ALL my gold for silver. Across the board, say I trade 10 ounces of gold, that would be 800 ounces of silver. Then, if the ratio got back down to say 70:1, ($1150 gold and $16.43 for silver), I'd trade back 700 ounces of silver for the 10 ounces of gold, and I have 100 ounces of silver REMAINING as pure profit. Matter of fact, probably HALF of my silver I have on hand currently, is set aside specifically for transfer purposes. Half of what I own is for the 4 reasons I specified initially above; but the other half of my silver is designed to transfer BACK TO GOLD when the ratio gets back to 60, 50, 40, or 30:1. Remember the peak of 2011??? Gold was close to $1900. Silver was right at $50. That's a 38:1 ratio. If I traded 10 ounces of gold for silver TODAY; I'd get 770 ounces of silver. If I traded it back at 38:1, that's right at HALF. I'd get the 10 ounces of gold back, but it would only cost me 380 ounces of silver. I'd have 380 ounces of silver as PROFIT!!!
Anyway; hope this gets you thinking. Take care:
CYA: SE:
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