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


Nick Elway
Aug 17, 2013 - 4:05pm

@twolf @MF Getting around DNS bans

Here's a good list of open DNS (Domain Name Servers)

It has the Google addresses as and (I don't think is good)

Here are the tracks from nslookup on my machine in the world of qwest dsl (Bold is what I typed) (It appears my qwest modem is blocking DNS lookup for

Default Server: qwestmodem.domain.actdsltmp
Server: qwestmodem.domain.actdsltmp
DNS request timed out.
timeout was 2 seconds.
DNS request timed out.
timeout was 2 seconds.
*** Request to qwestmodem.domain.actdsltmp timed-out
> server
Default Server:
Non-authoritative answer:

I put the good address for (and in my "hosts" file so this machine won't use the default DNS to find the address for tfmetalsreport again.

Aug 17, 2013 - 2:43pm

Mr. Fix

Frankly, I'm amazed at your even-mindedness in the face of a clueless wife (no disrespect to you). The only benefit that I can see is spiritual growth -- inasmuch as dealing with such a situation is ultimately humbling, thereby wearing away the proud ego we all have to deal with sooner or later.

I don't think I'm a misogynist, but dealing with many "entitled" women over the decades has made me more gun shy as the years have passed. I made a conscious decision in my youth not to marry. This was based upon observation of how our society, through marketing and advertising (think Bernays), was seducing women away from being supportive to their husbands and instead enticing them with baubles and beads.

Now, I'm not saying that this is the exclusive domain of the fairer sex, but it's definitely been a trend during my sixty-two years on this mud ball.

Thankfully, Wonderer chimed in and softened my initial response to your first post.

Now there's a gal I'd be proud to be with!

Again, Mr Fix, I am in no way criticizing you. In fact, I admire your stoicism.

You're a better man than me, Gunga Din.

Aug 17, 2013 - 2:42pm

@Spartacus Rex

If you mean my post re property law as to the general rule of possession, I'll point you in the direction you should go:

This is the secondary source used in California, by most judges and attorneys. I pointed you to the table of contents page for the section on personal property. It is, as you can see, exhaustive, and covers the concepts, and references controlling case and statutory authority.

My simple generalization, that is, possession of an item of personal property is proof of ownership, is the general rule. Note well that mere possession, while generally proof enough of ownership, can be questioned and defeated by one with a superior claim. However, since most personal property lacks a paper trail of being recorded at the county recorder, etc., that is why I mentioned the general rule.

That you want to insult me with ad hominem attacks upon my intelligence, speaks more to your shortcomings. I really enjoy a good intellectual discussion, so please, by all means, send your comments to me, post them, what ever you want. If you can please avoid the personal attacks, your points are most certainly likely to be taken with a better tone and will be more useful to the community, for sure.

As for your other comments, based on the Private Enterprise Zones, I will go back and look over your comments, organize a concise reply, and we can continue that discussion on that page.

In the spirit of this wonderful community here at tfmr, I ask you kindly to refrain from personal attacks, please. State your opinion, tell me I am wrong, fine. But the name calling and insults is not helpful to the discussion at all. If you insist on dragging the conversation into a no-win ad hominem back and forth, then go ahead right now and claim victory, for I shall not engage you or waste my time. There are other important things to do than highlight your personality issues.

Aug 17, 2013 - 1:10pm

Harvey's Up!

  • Harvey: The total of the 3 major gold bullion dealers( Scotia , HSBC and JPMorgan) in its Comex gold dealer account saw an increase in gold inventory tonight to 20.176 tonnes of gold. Brinks continues to record a low of only 4.13 tonnes in its dealer account. We have recorded the 30th consecutive day for negative GOFO rates and the 6 month GOFO rate increased in negativity and landed back into negative territory at -.00500%. The 16th of August, we gained a large 2.4 tonnes of gold at the GLD vaults.
  • GoldCore: Billionaire George Soros and Daniel Loeb sold their entire SPDR stakes in the past quarter, filings showed yesterday. Billionaire investor John Paulson cut his gold ETF holding for the first time since 2011 and it is believed he did this due to the falling gold price and negative media coverage.
  • GoldCore: Physical demand helped push August futures on the Comex in New York above the December contract for the first time on August 2, compared with trading at a discount before then. The three-month lease rate, reflecting the cost of borrowing gold, reached a four-year high on August 7 also signalling tight physical supplies globally.
  • Sumit Roy: The divergence between physical and paper demand couldn’t be more stark, according to WGC’s quarterly report. The second quarter of 2013 saw the worst performance for gold in close to 100 years as prices plummeted by 23 percent.
  • Bill Savadove: China began using the Arctic shipping route that could 'Change the face of world trade'. DS: Having the Arctic route open helps for at least part of the year for moving oil from East to West if the Suez Canal gets shut down, which is likely to happen at any time.
  • Matthew Boesler: JP Morgan in a note to clients Thursday titled, "Gold and the Denver play: Gold Shrugs Off the Paulson Sale; Buy the Bounce,"
  • John Hathaway: Gold is oversubscribed by as much as 100 to 1 because of futures and derivatives, a short squeeze is on, and there is growing distrust of the New York Commodity Exchange and the London Bullion Market Association and people want the phiz.
  • Harvey: Michael Pento correctly believes that the Federal Reserve cannot stop monetizing the uSA debt and the free market for interest rates is already front running what will happen in a few months. When Bernanke tapers 10 billion or 20 billion dollars from $85 billion per month, then the 10 yr rate will skyrocket sending stock markets crashing as well as our big bank underwriters of interest rate swaps. DS: What Harvey says is the plan.
  • Egon von Greyerz: I’ve been thinking about the end game. The conclusion I have come to is that this will go on for a long period of time because there won’t be a conventional end to the coming chaos. Total liabilities in the eurozone banking system are 32 trillion euros, which is about 3 times eurozone GDP. If we add in unfunded liabilities, the debt/GDP ratios in most countries is around 500%, and even as high as a staggering 1000%.
  • Egon von Greyerz: A bankrupt world is now headed into a period of frightening chaos, and banks and governments will not survive what is coming. he fiat currencies will be in collapse. There is a major risk of war breaking out in the next few years.
  • Sandeep Jaitley: He expects silver to go into backwardation soon.
  • Jeff Nielson: The One Bank launched one of its most savage assaults on bullion markets throughout the entire course of this 13-year bull market, causing all-time record demand for gold – while the market for its (fraudulent) paper-called-gold collapsed as paper and physical decoupled.
  • Keith Barron: Asian central banks are requesting that their gold, some of which has been stored in the West, be sent to Asia. This is what is causing the short covering rally in gold.
All this and more on... The Harvey Report! DayStar
Motley Fool
Aug 17, 2013 - 12:47pm


Thanks, I will attempt that.

Edit : And it worked. Thank you. :)

twolfe81Motley Fool
Aug 17, 2013 - 11:45am

Getting around ban


Don't know if this will help your case, but my ISP helped me get around without proxies while looking into the issue (the site is banned from TELUS locally to Calgary, AB both on DSL and over their cell network for some reason they can't figure out though works on other cell and ISP networks fine)...go into your Network Connection settings...not sure system/OS you are using, but in Windows case, you go into local area connection properties if hooked up by wire to the router/modem (or can try it under wireless settings too I believe). The Internet Protocol Version 4 (TCP/IPv4) connection, if you highlight it and click on properties, has an option at the bottom for "Obtain DNS server address automatically". If you change that to "Use the following DNS server addresses" and for preferred and alternate put in and which are major search servers for Google and Yahoo as I understand it, it will force any DNS lookup to them rather than to your local DNS catalog. You can do the same by putting those into DNS on the wifi settings of the network you're connected to for an iPad so the same principle should work for mobiles (",")

Hope this helps!

Aug 17, 2013 - 11:30am

Remember the Sequester?

Just a quick story...

So we have a popular National Park in the area i live. In discussing the amount of tourists around for this season, I remarked that it is a very strong year for visitors. Many observations points to this. I was telling this to a gentleman who owns a 'Welcome Center' locally, and prides himself at being 'in the know' about such things. (After all, it is his business. )

He remarked,

" Everyone you talk with has a different opinion. ( about #'s of tourists) Interesting you say that because the Park data is down by 15%."

"Really?" I replied.

" Everything I see points to BIG numbers of visitors." ( With many local business owners agreeing)

Then it hit me... the National Park was CLOSED for over a month later in the season due to the Sequester!!! ( Hmm, missing 15% perhaps?)

This, with EVERY bit of roadway and parking lot in the Park recently re-paved through the Federal Stimulus Program... While our state highways to get to the Park are deteriorating to a condition of not even being safe.

The Park service said it had to remain closed because of lack of funding (due to the Sequester) for Restroom and trash facilities.

This generated an outcry from local business owners fearing lost revenue. The Chamber of Commerce ended up filling the budget gap for the Park Service in an agreement to open the Park.

Wow. Is it just me, or are these dirty games being played? The public is being abused over and over by their handlers and keep making excuses for them, coming back for more.

Just a short story from Real town USA. Boots on the ground stuff.

Aug 17, 2013 - 11:15am


"Canadians adore their socialism and their forced language laws..."

Oh goodie. How can I put this?

Une meprise sur le sentiment public.

James Burke
Aug 17, 2013 - 10:50am



Americans tend to hold the view that Canadians, their neighbor to the north, are staid, bland, conservative and tend to look down on American culture. All of it false. Canadians enjoy plastering tattoos all over their bodies just as well as the American youth does. One thing that is true is that Canadians adore their socialism and their forced language laws and forced divorce laws (Men: before you go to court, bring your helmet).

Aug 17, 2013 - 10:31am

Saturday Morning News: World

Democracy in Egypt Can Wait - Charles Kupchan, New York Times
How Did Egypt Turn So Dark? - Shibley Telhami, Washington Post
Sunni-Shia Terror Ties Turn to Civil War - Matthew Levitt, Foreign Policy
Four Leading Arab Cities in Flames - Rami Khouri, The Daily Star
Merkel 3.0: Stasis You Can Believe In - Almut Moller, Der Spiegel
The World's Weirdest Borders - Michael Hanlon, The Spectator
All Coups End in Petty Tyranny - Daniel Hannan, Daily Telegraph
Russia's In, America's Out and Germany's Up - Jakub Grygiel, FPRI
Hezbollah Under Fire - Bilal Saab, Foreign Affairs
The Steady Destruction of Europe - Juliane Mendelsohn, The European
Israel Forgets Its Own Borders - Gershom Gorenberg, American Prospect
China's War Time Past Needs Scrutiny - Rana Mitter, Japan Times
Why Russia's Changing Its Tune on Iran - Nikolas Gvosdev, WPR
What's Harming Africa's Poor? Funerals - Roberto Ferdman, Quartz
It's a Greek Neo-Nazi Beach Party! - Gavin Haynes, Vice

An Aggression Against All of Lebanon - The Daily Star
No End in Sight to the Eurozone Mess - Daily Telegraph
Egypt: The Disaster on Europe's Door - The Guardian
Abe's Mistaken War Speech - Japan Times

The Dangers of Intervention in Syria (PDF) - Cato Institute
Algeria's Critical Juncture - Institute for Near East & Gulf Military Analysis
Everything You Need to Know About U.S. Aid to Egypt - ProPublica
Syria: Deterioration or Compromise? - Oxford Research Group

Obama Doctrine: Speak Softly and Carry No Stick - James Traub, FP
Egypt Crisis Unlikely to Damage U.S. Interests - Paul Richter, LA Times
Obama's Dangerous Passivity on Egypt & Syria - Jackson Diehl, Wash Post
Egypt's Blood, America's Complicity - Amr Darrag, New York Times
Obama: The Citizen of the World President - Elliott Abrams, Commentary
America Pivots to Asia, Europe Arms It - Robbin Laird, The Diplomat
Boycotting Olympics Won't End Russian Homophobia - Julia Ioffe, TNR
Egyptian Elite Succumb to the Hate Virus - Ulrike Putz, Der Spiegel
Egypt's Sexual Assault Epidemic - Bel Trew, Al Jazeera
What Getting Jumped by Muslim Bros. Looks Like - A. Ismail, Animal
Snowden Doomed to Life in a Capsule - Michael Bohm, Moscow Times
How to Beat al-Qaeda in Yemen - Gregory Johnsen, Bloomberg
Bosnia & Syria: Intervention Then and Now - Michael Ignatieff, Boston Rev.
Restoring Israel to Greatness - Jonathan Pollard, Jerusalem Post
All of the World's Architecture Is in China - Allison Meier, Atlas Obscura

What Obama Misunderstands About Egypt - Jeffrey Goldberg, Bloomberg
A Lack of Spine on Egypt - Eugene Robinson, Washington Post
Egypt's New Ruler - Mike Giglio & Christopher Dickey, Newsweek
It Only Gets Worse from Here - Issandr El Amrani, The Arabist
Cutting Aid to Egypt Would Backfire - David Francis, The Fiscal Times
Obama's Slap at Egypt Harms Our Interests - Benny Avni, New York Post
America Has Not Lost Egypt - Ryan Evans, The National Interest
The 'To Hell with Them' Doctrine - Jonah Goldberg, National Review
Syria's War Takes Hold of Lebanon - Aryn Baker, Time
Libya's Unarmed Revolutionaries - Fadil Aliriza, Foreign Policy
Can Nigeria's Leader Do the Right Thing? - Orji Uzor Kalu, CNN
U.K. Conservative Party Is Bleeding Members - Daniel Hannan, Telegraph

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Key Economic Events Week of 4/27

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