Investing 101 » Silver

2010 Review of Investments: Silver is Big Winner

admin — Sun, 02 Jan 2011 19:27:09 +0000

2010 Investment Performance

Dow Jones Industrial Average: up 11%
S&P 500: up 13%
NASDAQ: up 16%
Oil: down 1%
Gold: up 29%
Silver: up 89%

What should you buy in 2011? Based upon the performance in 2010, Silver is the clear winner.

There are many ways to invest in Silver:

Silver coins and bullion. Open an account at Bullion Vault to have them buy and store silver bullion for you.
Silver ETF (NYSE ticker symbol: SLV) claims to hold Silver and tracks the price of bullion
Central Fund of Canada is audited to contain about 45% of its assets in silver (NYSE ticker symbol: CEF). The rest is in gold bullion.
Silver mining stocks (NYSE ticker symbols: HL, SVM, CDE) which provide good leverage to the price of silver

Review of Investments in 2010: Dow up 11%, S&P 500 up 13%, NASDAQ up 16%, Oil down 1%, Gold up 29%, Silver up 89%

Is Silver in an ABC Correction?

admin — Mon, 29 Nov 2010 15:12:21 +0000

Do you remember the gold correction last winter (see this article)? Gold followed an ABC pattern of down, up, down and then a sharp bounce into the next rally.

We see a similar pattern unfolding for silver which could take spot prices all the way down to $22-23/oz. See the chart below for an idea of where silver MAY go in the next 1-2 months.

Gold to Silver Ratio

admin — Mon, 24 May 2010 17:44:39 +0000

Some people think that they can’t afford to invest in gold because it is expensive. However, Silver is much cheaper and is also a valuable way to protect your wealth and may even be a better investment than Gold. One way to gauge if Silver is a good investment relative to Gold is the “Gold to Silver Ratio.”

The Gold to Silver ratio represents the price of silver relative to the price of gold at any given time. The ratio is simply the price of gold divided by the price of silver represented in the form of a ratio. If the price of gold is $1,000/oz. and the price of silver is $20/oz. then the gold to silver ratio would be 50:1, or simply “50″ (1,000 divided by 20 is 50).

Natural Supply

One factor determining the gold to silver ratio is the physical ratio of these naturally occurring elements in the earth’s crust. According to the U.S. Geological Survey, on average silver occurs at 0.07 parts per million, and gold at 0.004 parts per million in the Earth’s crust. Thus, the naturally occurring gold to silver ratio is 17.5:1.

Historical Ratio

Historically, the price of silver drops faster than gold in a precious metals bear market and rises faster than gold in a precious metals bull market. The ratio is therefore applicable in determining market direction.

In the last great precious metals bull market, 1960 – 1980, silver outperformed gold about 2.3 times (230%). Gold rose from $35 to $850 or a gain of 2,429%. Silver rose from 90 cents to $50, or a gain of 5,555%, and 229% better than gold.

Current Ratio

The 200 year average for the ratio is about 30:1. As of May, 2010, the gold to silver ratio sits at about 67 where gold is $1,190/oz and silver is $17.80/oz. If the ratio just reverts to its historic average of 30, silver will outperform gold very nicely.

Trading Strategies

One way to trade the gold to silver ratio is to buy silver through the Silver ETF (SLV) when the ratio is high, say over 75, and to buy gold through the Gold ETF (GLD) when the ratio is low, say under 25.

For more information on the Gold to Silver ratio: