Buy Silver because ...

  • At 60 the gold to silver ratio is 3 times the ratio it held during most of the years it was used as US money (twenty silver dollars bought you one 20 dollar gold ounce) / 5 times the historical level of 12 .  Greater demand for both will mean a smaller ratio.
  • The only real inflation hedge alternative to gold.  $1400 gold is too expensive for many diversified investors.  When gold price moves back to the $1800-2000 dollar range many more traditional buyers will be forced to buy silver instead.  Demand for silver increases -> supply and demand results in a higher return for silver than gold.
  • 50% of silver consumed is by industry and much of that is unreclaimable.
  • In 1980 800 ounces of silver could you buy a house.  video discussion here
  • Higher price volatility.  This can work in its favor (high inflation/gold investors put off by price will look for alternatives) but also against it (selloff for whatever reason would work against the price of silver more than gold).
  • Industrial demand for silver exceeds demand for gold and all platinum group metals.  50% of silver demand is from technology versus 10% for gold.
  • Has ISO 4217 currency status.  Only other metals with this status are gold, platinum and palladium.
  • last 10 years silver up 400% gold up 300%

recommended investment practice

Over the last decade ETF's and physical gold have outperformed North American gold stocks.  Companies have been criticized for issuing too much equity.

Buy Gold because ...

  • There is much less industrial demand for gold than there is for the other metals making its price less dependent on economic activity.  Bad economy -> inflation -> return on gold more of a sure thing.
  • Central bank reserves rely more on gold than any other commodity.
  • John Paulson is one of a number of leading fund investors who only buy gold.
  • inflation hedge - search History behind the gold standard
  • last 10 years gold price up 300%

January 2014 : Gold starts 2014 up and why not ?  it ended 2013 down 30% to finish at $1185/oz (Dec 31) then went on to gain $85 (7%) by the end of Jan (29th).  This momentum was caused by : Fed tapering of stimulus, currency crisis in emerging markets.  By March the price jumped even further to $1340 thanks to tentions between the US, Russia, sanctions.

2013 Summer: Gold Price Drops Like A Rock - closes in on $1200 per ounce.  Why ? market manipulation perhaps sparked by gold shorts ?  whatever the reason, the fact remains gold is undervalued - under $1200 companies can't produce it properly, because of inflation in other materials affecting the cost of mining.  Note that gold is extremely cheap relative to oil, the other key commodity.  i) gold does well when interest rates go down which isn't happening right now because they are already extremely low. some people think central banks could be manipulating the price to keep people in equity markets. 

Global equity prices are falling but not in the US - Global market is a better indicator so I think gold will inevitably jump in price.  Biggest Canadian mine company (Barrick) and biggest US gold company (Newmont) calculated their all-in production cash costs at around $1000 an ounce.  This means that if gold price breaks through the $1000 support level new factors will come into play giving gold even more reason to rise.

negative influences : New tax on gold bullion in India (10%), and higher tax on gold jewellery imports (15%).  At 2013 diwali, gold demand is down 33% versus previous year.

August 29, 2013 update - Citigroup Inc raises the bar on gold prices !  gold price will exceed $3500 in next couple years because "we are back on track where gold is the hard currency of choice".

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 Gold is harder to find and more expensive to produce.  Silver is produced at 10 times the rate of gold.  If the price of both declines significantly, production pressures will keep the price of gold a lot higher than they will silver (gold silver ratio increases).

recommended companies

  • Goldcorp - stock up 150% last 10 years outperforming the other majors.
  • Barrick Gold - undervalued due to one time writedown on copper assets (equinox minerals) end of 2012.
  • Eldorado Gold - new gold mining in Greece.
  • Royal Gold - exposure to a slew of mineral types
  • Silver Wheaton - world's largest silver streaming company pays only $4 per ounce, isn't exposed to the volatile nature of the mining industry.
  • Seabridge Gold - owns 100% of Canada's biggest gold deposit, the Ksm gold project in British Columbia has 39 million ounces of 2p gold reserves.  Polymetallic ore.