Gold and Silver Trading Strategy

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GoldInvestments
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Gold and Silver Trading Strategy

Postby GoldInvestments » 29 August 2016

Trading the Gold and Silver Ratio

The gold and silver ratio has hovered widely in recent times - From 14:1 to 80:1. But in ancient and modern history times we are looking at a 16:1 ratio. So the recent decade moves in the ratio can very up to 400%.

Gold-21-08-2015.png


Silver is the high beta in the relationship and this is what makes up this relationship volatility within a related trading relationship on a weekly basis. Rarely on the odd day silver could trade in a different direction to gold, but always these two monetary masters follow each other in a secular and cyclical move.

The reason one should consider trading the gold and silver ratio, in which they directionally follow each other, is the idea that this could boost returns. Even if gold is to double from here, silver is likely to triple. So gold doubling at $2700 and silver tripling to $60 this is a ratio boost from 70:1 to 45:1 which is accelerates the returns by a further 35%.

The trade needs you to short gold and long silver in identical currency values, say $10000 each way. I use this as a second tier trade as part of my core gold and silver positions. But also don't forget that if the ratio goes to 80:1 then you are losing your shirt, together with your core positions suffering. So you need to track your trading account cash as part of this risk.

The last major high in the two shiny monies was in 2011 after the first QE. The ratio reached 39:1. The last modern day low in this ratio was in 1980 when it reached 12:1 intraday but closed at 17:1. This was the ancient worlds ratio level. I would need evaluate to this event a coincidence but an interesting piece of trivia in any event, even if it was for a single day occurrence. The 35:1 level many would say is a mid secular cycle mark. I would say this may be just a good concept but I wouldn't take that thought as a given. Governments do have a way to spoil our fun.

If those which think the ratio levels are a good indicator to predict the overall secular high in gold, we could extrapolate this to the 16:1 level. Gold would then reach $4000 and silver $250. Another coincidence here because this are the levels some experts where saying gold would get to when the bull market in gold started last decade. For those thinking of a $10000 gold scenario then silver could hit 8:1 therefore $1250 per ounce.

Hmmm lets see if governments even let us sell this for actual money or digital money and then tax us to oblivion because it leaves a transaction trail. Or make us terrorists for not trusting their money and dealing the true value of man's existence. Or one could trade assets such as buying a whole city block in Berlin for 10 ounces of gold after WWII. Forecasting political scenarios is another discussion altogether, but gold will be part of any picture of world changes.

by Steve Andelkovic
Funds Manager
Gold and Energy Investments
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Golden Bull
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Re: Gold and Silver Trading Strategy

Postby Golden Bull » 30 August 2016

@ Steve,

Also keep in mind that the major difference between silver and gold is that silver is actually much more useful commercially. While Gold can be manipulated rather easily through large central bank selloffs, silver always has a real baseline industrial demand. Compared to gold, there is very little silver that is used solely as investment instruments. What this means is that the silver supply is far less flexible to market shortages thus high prices can be commanded in the event of shortages due to use in currency. Just think of all the people that will want to buy silver once the currency collapse/reset starts. Gold is just to inaccessible to the average person, but silver? Well silver will be the new gold. Things will get so bad that we will likely even see copper coins!

Very few people look at these ratios & YES now is a good time to buy silver (& even perhaps swap some stacked gold for silver), but unless you feel confident in what you are doing, I find it better to just keep stacking (in this case, stack more silver dollar-wise, than gold). I've found I'm not good at "timing the market". Just use your spare cash left at the end of the month (after paying off ALL expenses) to buy more gold & silver to stack safely somewhere & then leave it alone. The market will go up & down & good market "timers" may end up with more in the end than simple stackers. Good for them! Don't forget to do other things first, besides stacking gold & silver (in case of the worst possible effect of a Global Economic Reset).

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Re: Gold and Silver Trading Strategy

Postby SilverSnake » 01 September 2016

I like what you talked about. My thing is I know I should be buying silver eagles before anything else. They are 1 ounce and fine silver. The problem is the pawn shop keeps throwing Morgans out in their display case. I love the design but these coins are 90% silver and not a full ounce and cost about $5 more than the eagles. I am buying morgans, peace dollars and eagles all at the same time. I know the morgans and peace dollars have more collector value but I just don't know that this strategy is going to be best. Diversification? Maybe. But less silver weight overall.

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Freddy
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Re: Gold and Silver Trading Strategy

Postby Freddy » 02 September 2016

SilverSnake wrote:I like what you talked about. My thing is I know I should be buying silver eagles before anything else. They are 1 ounce and fine silver. The problem is the pawn shop keeps throwing Morgans out in their display case. I love the design but these coins are 90% silver and not a full ounce and cost about $5 more than the eagles. I am buying morgans, peace dollars and eagles all at the same time. I know the morgans and peace dollars have more collector value but I just don't know that this strategy is going to be best. Diversification? Maybe. But less silver weight overall.


I got into precious metals many years ago and the fundamentals have not changed. I still think any precious metals holder should have some gold. You can't beat the portability, weight and global understanding. :shock:

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Re: Gold and Silver Trading Strategy

Postby Gold Bird » 18 May 2017

SilverSnake wrote:I like what you talked about. My thing is I know I should be buying silver eagles before anything else. They are 1 ounce and fine silver. The problem is the pawn shop keeps throwing Morgans out in their display case. I love the design but these coins are 90% silver and not a full ounce and cost about $5 more than the eagles. I am buying morgans, peace dollars and eagles all at the same time. I know the morgans and peace dollars have more collector value but I just don't know that this strategy is going to be best. Diversification? Maybe. But less silver weight overall.

I don't think any new beginner should be buying numis'. That is a market for very experienced dealers and collectors. It is what I call the "greater fool theory" where your looking to sell it to someone else for more than you paid. Beginners should stick to maples and eagles. But having said that, I have a question for you. When taking a profit should I sell the most expensive first or the least expensive ones? If I sell the most expensive first - it lowers my average cost per oz. If I sell the lower cost ones first, I get a greater profit.


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