Silver and Gold Allocation

[webmaster]

Subject:Silver and Gold Allocation
By: David Morgan, Silver Investor

Overview: One question I often receive is how much money an investor should put into the precious metals. There is no simple answer, yet I want to remain consistent. When I wrote The Ten Rules of Silver Investing, it was stated that 10% was enough of a diversification. Since that book was published nearly a decade ago, I have told my readers that perhaps an allocation of up to 20% might be considered, due to the current economic environment on a worldwide basis.

Link: http://news.silverseek.com/SilverInv...1214594035.php

[daman4455]

David,

As an Indian my perspective about PMs is entirely different. Most of the time we dont agree to 24X7 bullish comments about silver. Fundamental truth in any market: There is always excesses due to emotional and psychological equation of the investors. These excesses result in parabolic rise or disastrous decline in the prices. Most of the time silver bugs are very enthusiastic when that froth happens, prices go sky high and very abusive about PPT or money management of Government when prices decline steeply.

You will be happy to know that Indian scriptures and old text advise individuals to underwrite 25% their capital in to PMs.Our per capita income may be lagging but our per capita PM savings is highest in world.

Sadly our imports of PMs are declining. Silver imports have reduced from 5000 ton per annum to 1300 tons solely due to volatile price in last three years. Gold imports are down this year from a peak of 890 tons to 570 tons, again due to extreme volatility. In this internet age volatility may persist as knowledge is common to all and greed impulse is instataneous. Indian buyers are mostly rural folks and many dont have bank accounts. They invest in PMs because their ancestors advised them for generations. They dont understand volatility and have developed dislike for all gold and silver traders in India. These agrarian population thinks that we are profiteering. It will take decades for them to come to terms with volatility of internet age. In summary VOLATILITY has destroyed traditional market.This is a new development and I am sure this will have slow but steady reflection on prices in coming years. Indian hardly produces any Gold and Silver and relies on Import. No wonder Imports have declined. I am sure world can not ignore largest consumer of PMs for longer period. Gold and silver may see 1200-1500 and 20-30 dolors. But all in papers. You hate paper currency but that is what exactly happenning in PMs too. All paper contracts. Miners will find it extremely difficult to market their product in coming years as the paper economy would have destroyed traditional economy of physical ownership.

[Argentum]

Welcome to the boards Daman, it will be valuable to have a voice from India to give insight. Keep in mind that what you may think is common every day knowledge to you, may often be unknown to us.

And can't we just blame Shiva for all the volatility?!?

[JaySpizzy]

Another welcome, Daman.

Thanks for the Indian perspective on silver demand. Could it be that what you are calling volatility is really the restructuring in the price of PMs, caused by the year to year devaluation of paper money? If that is so, and the price of gold and silver will continue to go up, then those in your country who have fulfilled the scriptures and saved 25% or more in PMs are already in a very solid position.
As the price of PMs rise, their standard of living will change accordingly.

It is we, in the west, having saved very little, who will create the unprecedented demand for PMs as currencies begin to decline and we scramble to preserve our buying power.

If all this is true, then PMs are extremely cheap at todays prices, and the smart money will buy them.