Silver for gold -- and vice versa

Fri, Aug 16, 2013 - 4:33pm

The warden said:
"The exit is sold.
If you want a way out,
Silver and gold."

There's been a lot of talk, maybe too much talk... :-) about which precious metal is best to own, why, when, in what ratio (if any, for some). Not a trivial question to ask if one is just beginning to stack -- and not one to ignore if one had at one point tragically lost a sizeable stack in choppy waters on a midnight fishing expedition.

There are economic, monetary, industrial, geopolitical, social and in ALL cases personal considerations -- I cannot hope to cover them all: but I would like to try to start a conversation about them, and eventually dig up more details in future posts. We are all our own 'financial advisers', to a greater or lesser extent we are trying to act as such for our family and friends. It's important to have a solid, well-founded understanding of at least the pillars influencing the decision which metal to choose and in what ratio. And whether and when this decision should be revisited.

Being the Luddite that I am, I do NOT feel comfortable investing my savings in paper representations of legal claims on property I do not physically control – as I see a non-trivial risk in being subordinated if not outright dispossessed of said ‘ownership’ as and when the current monetary paradigm hits a convenient milestone on its lurching path towards its eventual demise (and subsequent transformation). While I do not (as yet) foresee the end of the world as we know it in ALL areas of life, I DO remember, and therefore anticipate the possibility of ‘bail-ins’ on a much more breathtaking scale than we have seen thus far -- at least recently. Perhaps direct registration of shares or physical certificates will help. The fact that I see this as a ‘perhaps’ is enough for me to stick to physical, tangible, directly held assets. But as Ernest Hemingway said, you go broke gradually, then all at once. I don’t think we’ll get a red-striped letter in the mail saying ‘WARNING’ beforehand (any more than we already have, of course) – the entire point of making an (admittedly pretty final) move like this is to have as many people still holding the bag as possible. While general warning signs abound (and will multiply), there will be no text message telling me it’s no longer safe. Year early, minute late and all that. Hence my focus on physical accumulation.

My very first investment in precious metals did not bode well for my future in being a PM bug -- a spouse who vehemently enough disagrees with a particular allocation decision is a powerful impetus for liquidation. It was, to others, a trivial sum -- 50 oz of silver -- but it was powerful enough that it forced me to start over, re-examine all my premises, information and informed predictions about the future. In doing so, I realized that my conclusions and planned course of action were correct. I ultimately convinced my spouse that my efforts to keep a portion of our nest egg in PMs was not founded in specious, get-rich-quick arguments, nor stemmed from a gambling addiction.

Going through the process of checking the premises helps think through a cogent, convincing argument for others as well. In my mind THAT is why TFMR is invaluable - the persistent reader can find ALL kinds of opinions to challenge one's premises. Main Street is called thus for a reason -- it represents a numeric majority of like-minded individuals, who will have a number of shared assumptions and experiences. But in the Forums you will find views to challenge ANY assumption, if you choose to look.

The element of metal allocation that I wanted to focus on (and ask YOU about) is the GSR -- the number of ounces of silver required to get an ounce of gold. My own perspective is that I am currently overweight in silver, and want to increase wealth preservation and decrease risk, and for the moment have no current intent to sink further savings -- unless there are extraordinary circumstances (e.g. silver drops to 14-15 and can ACTUALLY be bought anywhere near those prices). My thinking has been voiced earlier by DPH and others several times -- trade silver for gold as their relative valuation in fiat shifts (and thus, for the time being, their tradable ratio) and gold becomes less expensive in terms of silver. Simple enough, on the surface.

There are some who expect this ratio to drop to (or even below) 1 [you know who you are] -- and some who suggest a ratio around 15:1. There are those who think 15:1 is bollocks.

There are those who think they can identify turning points in the GSR -- Silver: The GSR Bottom Finder

There is a good bit of detailed (if dated) material in this old article from The Moneychanger. It's a REALLY long piece with lots of detail, but I have not had a chance to vet its sources, so DYODD. Despite the title, the 'meat' (swapping metals to increase net ounces held) of the article is at the end.

The GSR is regularly discussed in The setup for the big trade and lots of other threads here. Casey Research seems to dismiss the GSR as an unreliable indicator for investment: Guest Post: The Gold-Silver Ratio – Another Look

And of course there is the MOPE in the media -- I was not going to get into this, but this report was too good to resist:
This August 15th Gold Council report was referenced by Business Insider, and headlined thus --CHART OF THE DAY: Gold Demand Is Evaporating. Very amusing.

"Total demand has fallen to its lowest level in 4 years, owing to a decline in demand for gold for investment related purposes (demand for jewelry and coins continues to grow).

Here's the chart showing total demand going back to the beginning of 2010, wherein you can see that the last two quarters are the weakest we've seen in recent years."

But onto more serious matters. Is it enough to look at a chart like this:

Or does it make sense to consider a chart more like these:

In both cases, do the more recent (20th century) values now represent the 'new normal' -- or are they extreme swings which will revert to the mean?

This one is for people braver/smarter than I (of which I'm told there are many):

Well, at least it does not seem like the demand for gold for investment purposes HERE is likely to evaporate soon...

So, dear Reader -- what, if any direction is YOUR preference? Buy more silver now, expecting the GSR to fall further? Or just the opposite – when S truly HTF, will GSR shoot to eve-of-WWII levels (and beyond -- according to some)? Buy both in some ratio? Swap one for the other NOW? Is the goal larger net value of assets in current fiat, or a higher number of ounces, and are the two the same thing? Does portability figure into anyone else's calculations? How does this calculus change as prices march onward (dare I say HEH?), or conversely if they should fall further?

About the Author


Aug 19, 2013 - 6:24am


Caught that little "dip" below 23.20 this morning.

Added a few Copper Rounds to my order. I like the designs, but didn't want to pay the premiums for silver. Instead I paid $1.50 for 20 cents worth of copper. ;-/

Got a Zombucks, Lakota Sitting Bull, a Giant Lincoln Cent, and a Don't Tread on Me.

The giant penny might be "fun"?

Aug 18, 2013 - 8:31pm

Thank You, JY896!

I am very pleased with the top caliber posts, of our, 'In House TFMR' volunteer Posters!

What a fine array of clever people, a hearty pat on the back for all.

Thank You, TF, for coming up with a way to keep the site up and running.

I hope the new model relieves, Mr. TF., Mrs.TF., and the darling LTs. of some of stress and strain, due to financial and time investment demands with the previous model.

I wish the best for You and your wonderful Family, and hope the new 'Turd's Vault' becomes a real going concern.

A happy Turd is a productive Turd.


The most marvelous thing is that the Site is available to educate and enlighten Newby's, and keep everyone else well informed.

The community is provided a venue to gather and learn, to remain together just like the old barber shops, or corner pubs.

Thank you, again to our most wonderful resident guest posters, GL, CL, Xty, AM, JY, P4, Puck T. (posthumously, God rest His soul.)

I know there have been Others as well, Kudos and many thanks to All.

Happy foggy

Aug 18, 2013 - 6:23pm

For those of you...

That have been trying to figure out how much silver there actually is, you might find this article from 2006 to be interesting:

The Silver Deficit (1942-2004)

Thorusboomer sooner
Aug 18, 2013 - 11:58am

I've set a ratio, and I'll let the market drive my gold/silver

My approach is to Turd's questions is to keep about two-thirds of the value of my precious metal in gold, and one-third in silver. That's driven as much by the logistics of storing quantities of silver as anything else.

At this point, while I'm accumulating a stack, I just make my decision about whether to buy gold or silver next based on which purchase would put me closer to the 2/3rds value gold & 1/3rd value silver ratio.

When I retire and don't have as much income coming in to make the adjustment by purchasing more metal, and as the prices of gold and silver change, if it turns out that selling a hundred ounces of silver to buy an ounce or two of gold would put me closer to the 2/3rd and 1/3rd ratio, I'll sell the silver and buy gold. Same in reverse when the prices drive it.

That way, I'm letting the realities of the market drive my purchasing and selling, rather than guessing on my part. That way I'm continually selling the metal that's become more valuable - harvesting the gain, and buying the metal that become cheaper and better value.

As far as Boomer's question on where to buy, my LCS is frequently out of Gold and Silver American Eagles and Canadian Maple Leafs, which are my preferred forms. So I've started buying from Liberty.

I've made several purchases of both gold and silver, and though I've had to wait 2-3 weeks on occasion lately, I've always gotten my order with no problems or follow-up required on my part.

Best Regards,


Aug 18, 2013 - 10:25am

Boating Accidents

Also included in the Sheriff's budget was 8 round trip tickets to the Bahamas. Maybe the stack is still safe. Evidently the Sheriff not in the picture as he was at the Travel Agency buying the tickets.

Aug 18, 2013 - 10:08am


Thanks for the reply & info.

Aug 18, 2013 - 9:41am

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

Aug 18, 2013 - 8:17am

almost missed your ?, hard

almost missed your ?, hard for me to read everything here with all the concurrent threads.........

i did a complete recovery not a 'restore to earlier point'

the bug i had in here [even with very good antivirus] would not let me restore [thats a sign u have a bug i am told]

this computer is 2.5 yrs old HP has a recovery manager program in it that walks u thru it.......but older computers can be done manually.

i put all photos, docuements n downloads on a DVD disc...........erased the windows 7 operating system [this computer keeps a windows 7 operating file inside it somewhere---older computers u must have made a disc of it prior to infection........ if u have lost ur original it came with----somewhere in there it tells u how to make one or u can google it]

anyway all problems were solved........i really noticed it on THIS website............and then the not being able to restore was a tip off.

i would go thru restore to earlier point deal.............and then it would say 'restore unsuccessful'----thats the bug keeping u from getting rid of it.

sent u same thing in PM but i think i remember u don't go there.

Aug 18, 2013 - 4:37am

@ s1lverbullet

The objective that you describe was of such importance to me, that I once did a guest post on it.

I hope you find it, and the comments, useful. :-)

Subscribe or login to read all comments.


Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 5/18

5/18 2:00 ET Goon Bostic speech
5/19 8:30 ET Housing starts
5/19 10:00 ET CGP and Mnuchin US Senate
5/20 10:00 ET Goon Bullard speech
5/20 2:00 ET April FOMC minutes
5/21 8:30 ET Philly Fed
5/21 9:45 ET Markit flash PMIs for May
5/21 10:00 ET Goon Williams speech
5/21 1:00 ET Goon Chlamydia speech
5/21 2:30 ET Chief Goon Powell speech

Key Economic Events Week of 5/11

5/11 12:00 ET Goon Bostic speech
5/11 12:30 ET Goon Evans speech
5/12 8:30 ET CPI
5/12 9:00 ET Goon Kashnkari speech
5/12 10:00 ET Goon Quarles speech
5/12 10:00 ET Goon Harker speech
5/12 5:00 ET Goon Mester speech
5/13 8:30 ET PPI
5/13 9:00 ET Chief Goon Powell speech
5/14 8:30 ET Initial jobless claims and import prices
5/14 1:00 ET Another Goon Kashnkari speech
5/14 6:00 ET Goon Kaplan speech
5/15 8:30 ET Retail Sales and Empire State index
5/15 9:15 ET Cap Ute and Ind Prod
5/15 10:00 ET Business Inventories

Key Economic Events Week of 5/4

5/4 10:00 ET Factory Orders
5/5 8:30 ET US Trade Deficit
5/5 9:45 ET Markit Service PMI
5/5 10:00 ET ISM Sevrice PMI
5/6 8:15 ET ADP jobs report
5/7 8:30 ET Productivity
5/8 8:30 ET BLSBS
5/8 10:00 ET Wholesale Inventories

Key Economic Events Week of 4/27

4/28 8:30 ET Advance trade in goods
4/28 9:00 ET Case-Shiller home prices
4/29 8:30 ET Q1 GDP first guess
4/29 2:00 ET FOMC Fedlines
4/29 2:30 ET CGP presser
4/30 8:30 ET Pers Inc and Cons Spend
4/30 9:45 ET Chicago PMI
5/1 9:45 ET Markit Manu PMI
5/1 10:00 ET ISM Manu PMI

Key Economic Events Week of 4/20

4/20 8:30 ET Chicago Fed
4/21 10:00 ET Existing home sales
4/23 8:30 ET Weekly jobless claims
4/23 9:45 ET Markit flash PMIs
4/24 8:30 ET Durable Goods

Key Economic Events Week of 4/6

4/8 2:00 ET March FOMC minutes
4/9 8:30 ET Producer Price Index
4/10 8:30 ET Consumer Price Index

Key Economic Events Week of 3/30

3/31 9:45 ET Chicago PMI
4/1 8:15 ET ADP Employment
4/1 9:45 ET Markit manu PMI
4/1 10:00 ET ISM manu PMI
4/2 10:00 ET Factory Orders
4/3 8:30 ET BLSBS
4/3 9:45 ET Market service PMI
4/3 10:00 ET ISM service PMI

Key Economic Events Week of 3/23

3/24 9:45 ET Markit flash PMIs
3/25 8:30 ET Durable Goods
3/26 8:30 ET Weekly jobless claims
3/27 8:30 ET Personal Inc and Spending

Key Economic Events Week of 3/9

(as if these actually matter)
3/11 8:30 ET CPI
3/12 8:30 ET weekly jobless claims
3/12 8:30 ET PPI
3/13 8:30 ET Import Price Index

Key Economic Events Week of 3/2

3/2 9:45 ET Markit Manu PMI
3/2 10:00 ET ISM Manu PMI
3/2 10:00 ET Construction Spending
3/4 8:15 ET ADP employment
3/4 9:45 ET Markit Service PMI
3/4 10:00 ET ISM Services PMI
3/5 8:30 ET Productivity & Unit Labor Costs
3/5 10:00 ET Factory Orders
3/6 8:30 ET BLSBS
3/6 10:00 ET Wholesale Inventories