Warning: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in ..../includes/class_bootstrap.php(430) : eval()'d code on line 134

Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19

Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19

Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19

Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19

Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19
Gold Silver ratio
Results 1 to 5 of 5

Thread: Gold Silver ratio

  1. #1
    Join Date
    Dec 2009
    Location
    Chicago
    Posts
    4,376

    Default Gold Silver ratio

    I am not the only person who thinks the Gold/Silver ratio is not relevant.

    http://seekingalpha.com/article/4345...-t-buy-into-it

  2. #2
    Join Date
    Apr 2009
    Posts
    233

    Default

    The ratio is not relevant. Look at Palladium. It is rarer than gold at a much lower price. Also consider this: experts say it will take 20 years to completely deplete the World's silver. So taking the (heroic) assumption that mined silver supply will continue to be what it is now until it suddenly runs out in 2032, then maybe there is only about 15bn ounces of silver left above and below ground. Assuming no consumption of gold (only storing) there is maybe 7bn ounces of gold above and below ground, with the preponderance of gold above ground. So using a ratio/rarity argument you could come up with a ratio of 2 to 1, silver to gold. And that is conservative because you are matching mostly above ground gold to below ground silver! But we know that is not going to happen. Or take the gemstone; tsavorite garnet. Looks like emerald, harder than emerald, more beautiful, less included, and a fraction of the price! Why? As they say, "it is what it is". The demand for a tangible dictates the price not a ratio. That's it! Maybe you can find a historical correlation between silver and cow dung! (the statistician's litany; "you can always torture the data until it confesses!") But what ex ante explaining power does that have? None.

  3. #3
    Join Date
    Dec 2009
    Location
    Chicago
    Posts
    4,376

    Default

    (the statistician's litany; "you can always torture the data until it confesses!")

    Excellent quote!

  4. #4
    Join Date
    Apr 2009
    Posts
    5,003

    Default

    The ratio IS relevant...depending on how you look at it.

    I use the ratio in relation to gold and silver only.
    Back in 2008 I swapped some gold for silver when the ratio was in the 70s.
    Last year when the ratio dropped to 30 I swapped a bit of silver for some gold.

    Playing the ratio is a way of gaining more of what you already have without having to add new capital.
    Caedite eos.

  5. #5
    Join Date
    Apr 2009
    Posts
    233

    Default

    The danger in using a "switch ratio" is if there is a secular change in the relationship between two assets, your ratio driven methodology will always have you in the asset which will move to lower long term price. So buy gold at a ratio of 30 and watch the ratio go to 8. Ratios are only good when there is a mean reversion which is more or less permanent. Best to use this kind of methodology when arbing between a derivative and an underlying security.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •