Maybe I Was Wrong, Gold Just Broke $1480

Maybe it's just me but isn't this a relatively bad time to sell gold to buy silver? I am saying this from the standpoint that the gold/silver ratio is around 35:1 and in the recent past has been in the 60:1 all the way up to around 80:1. So if you sell one ounce of gold, you get about 35 ounces of silver but in the past you could do that and get about 60 or even 80 ounces of silver. To me, that's the time to sell gold to convert to silver, and then when it gets to 35:1 sell silver to get gold.

As an example, if you sold when it was 70:1 and turned in 1 ounce of gold for 70 ounces of silver, then you could turn around and trade in 70 ounces of silver for 2 ounces of gold. So you would end up net +1 ounce of gold. Does this make sense?

I'm really jealous! Foresight, luck, or just investments you made as a diverse strategy?

JackB,I would like to be able to say I am smart but it was a bit of luck and foresight. I don't trust governments implicitly so some things I saw going on led me to start looking for "alternative"investments,ie not paper. I did some study and took the dive into gold. It was a very difficult thing to do at the time because usually I am not much of a risk taker but the more I saw the more convinced I was it was NOT a risk. I bought on drops and held. About 3 years ago I started stacking silver for the same reason and I retired in July,2010,debt free and with a nice hoard of precious metals. I just think God was looking out for me.

That's the thing about markets, isn't it? We have a real clear view of what we should have done in the rear-view mirror but not so good a view of what's coming next through the front windshield.

I liked your comments about the gold:silver ratio. That should be a BIG number to all who collect gold and silver. My thought is that the actual ratio of gold to silver in the Earth is about 16-17:1. In economic theory, at least, that should be the price ratio of gold to silver as well. In an "efficient market", it would be.

What we are seeing now is the market coming towards greater efficiency. If this trend continues, gold will continue to rise slowly, mostly due to dollar inflation, but silver will continue to rise rapidly until we get near that 16-17:1 ideal ratio.

Looking at today's prices, we could have gold rising to, say, $1600/oz., sometime this year and silver rising into the $90-100/oz. range. That is more than a double for silver but only about an 8% rise for gold.

If I were into the trading gold for silver or silver for gold business, I would be holding and accumulating silver at this time and would sell gold in order to buy more silver.

If the above scenario plays out at anywhere close to what I've outlined, LARGE silver profits are in the offing. Not only that, but if the gold:silver ratio does indeed drop into the area of 20:1 and perhaps even lower than that, it would be an outstanding time to cash in the silver for gold and then hold that. It would also be a great time to take some profits off the table.

While I have only recently returned to coin collecting after a very long absence and don't know as much about it as I would like, I have been a successful small investor for 30 years, so know a bit about markets... including the fact that no one can always predict their futures.

I am starting to think my best bet to get a hold of some serious gold now, is buy myself one of those White's metal detectors I keep seeing commercials for, and start covering high traffic grasslands like the park down the road perhaps an soccer fields....

Apr 15 2011 11:51PM NY Time
Gold Silver Ratio 34.509

I most certainly agree with all the above statements, this is one of my long term investment vehicles, and I too started buying gold when it was around $400 /oz.
If you look at the overall >50 yr picture, it shows you that Gold will at least outperform Inflation, so for me, ANYTIME is a good time to buy Gold,or silver.
Whenever I have money I pour it into gold.
My intention is to sell in approximately 15 yrs from now. Hopefully it will continue on the path as it has for the last 50yrs. I bought 3 OZ's last month from the Gold ATM in Emirates palace, and my wife thinks I am crazy as I paid about $20 over the days spot each, I showed her the price this morning compared to last month. I am already breaking even.

Historically, pt trades for a higher price than au.

A friend of mine used this knowledge to work an options trade. When pt was cheaper than au, he sold 100 oz contracts of au, and bought an equal amount of pt.

It doesn't matter if PM prices go up, down or stay about the same, as long as pt either ends up higher than au, or at least closes the gap.

Explanation:

Start with au at 400, pt at 350, buy pt, sell au:

1) au goes to 500, pt to 550. Lose 10k buying au back, but make 20k on pt, net 10k.

2) au goes to 350, pt to 400. Gain 5k buying au back, and make 5k on pt, net 10k.

3) au goes to 300, pt to 350. Gain 10k buying au back, break even on pt, net 10k.

4) au goes to 300, pt to 300. Gain 10k buying au back, lose 5k on pt, net 5k.

5) the only loss scenario is if pt is more than 50 lower than au.

Since you're buying and selling substantially equal $ amounts, you don't have to have $40k in your account, just fees and a small % of the contract value, which is refundable when you close out the contracts.

edited for clarity.

Interest rates on mortgages were 15%+, short-term loans could pass 20%. Gas broke $1 a gallon. Gold hit a peak around $900. I had a friend who locked in some 30-year utility bonds paying 17.5%.




It all depends on what you use as starting and ending values. Volatility has always been around.

Examples:

One day, I called to confirm a krand a customer wanted to buy. I quoted the customer a price, and the wholesaler said "well, does he want it or not?" which was kinda rude. The customer said OK, and I locked in the price. The wholesaler said OK, fine, I just wanted to know where we stood, gold went up $9 during the call (about a minute).

Another time, after the peak, I sold 182 krands for $620 per. The next day, gold went up $100 an ounce.