Chinese Investors Encouraged To Buy Silver
With 1 ounce of gold selling for $955 and an ounce of silver selling for only $14.63, gold is currently about 65 times the price of silver. Last year the ratio was only 50 times. This is significantly above the long-term historical ratio of gold being worth 16 times more than silver. Even in nature, silver is about 17 times more abundant than gold, and unlike gold the quantities above ground are constantly diminishing because of its industries use.
By these standards, silver is undervalued when compared to gold. Check out this Chinese news video advising investors to buy silver!
Going by the historical ratio of 16, silver should trade for nearly $60/ounce. Or conversely gold should sell for a mere $240/ounce. Although I have a gut feeling that one is more likely than the other, if you wanted to trade this without making a directional bet, you could enter a paired trade.
In this case, the pair trade would be to short gold and go long silver, however with all the manipulation that seems to be going on with regards to both of these commodities (see the last post on Fraud in Silver ETFs), there’s no guarantee when the ratios will converge to the historical averages. Unlike the gold-platinum ratio which was a great trade for futures traders in December 2008 (The price of platinum dropped below that of gold for a few weeks creating a great paired trade), this may not pan out for a long time.
Better to just buy silver coins or silver bars directly or Perth mint certificates.
If you found this post helpful, consider donating to my coffee fund!![[del.icio.us]](http://images.del.icio.us/static/img/delicious.small.gif){kind=small}
-
![[2000 Australian Perth Mint Lunar Gold dragan 2 oz Coin]](http://livingoffdividends.com/wp-content/uploads/2008/11/2000_lunar_gold_dragan_2oz-150x150.jpg "[2000 Australian Perth Mint Lunar Gold dragan 2 oz Coin]")
Perth Mint Suspends Orders For Gold Bullion As a follow-up to my previous 2 posts on gold, here's a news article about the Australian Perth Mint suspending orders for gold bullion until January. Apparently having it's workers slog 7 days a week isn't enough to meet demand! FEARS of the unknown long-term effects from the global financial...... - Buying Cheap Gold Coins Gold and silver are global commodities with spot prices being the same all over the world (assuming you live in an open society). The only differences are the premiums that dealers charge buyers. One of the surprising things has been the large increase in premiums on gold and silver coins.......
- How To Invest Like China In the last post we saw that China was slowly diversifying away from it's usual investments in US Treasury Bonds and investing in hard assets, natural resources and maybe other currencies. There probably a very good reason why the world's second largest holder of US Dollars is weaning itself away from bonds issued by......
Related Websites
- Avoiding the Bubbles: Knowing when Not to Buy Can Save You Thousands One of my goals here at SF is to discuss sound personal investing. Not exactly a novel concept I know, and I'm sure you can find a myriad of columnists and self promoting TV personalities screaming BUY! BUY! BUY! as loudly as possible just to get your attention. I'm really......
- Precious Metals In Short Supply? I received the following letter this morning from a company that I have bought precious metals from in the past: Dear David, Due to the OVERWHELMING demand for precious metals, our online ordering system has been unable to keep up with our customers' needs. We have had to disable the......
- Beyond the Emergency Fund: Preparing for Economic Collapse The following article is the third in a five-part series, Beyond the Emergency Fund. Previous posts discussed ways to store water for emergencies, and how to store food long term. It's hard for most Americans to imagine what a full economic collapse may look like. Unfortunately, many other countries are......
[All content is copyright of Living Off Dividends & Passive Income]
Leave a Reply