Today we continue yesterday’s thoughts regarding whether one should focus on silver or gold. Of course, there’s no hard and fast advice to give. Too much depends upon one’s personal priorities, budget, philosophy, goals, portfolio, etc. With this in mind, we’re simply offering some thoughts regarding why so many are focused on silver so that you can evaluate for yourself.
One of the reasons that silver production, compared to gold, isn’t as high as their availability in the crust is that it’s rarely profitable to mine silver alone. This is because it’s usually found in trace amounts where other metals are the source of the mining operation. Australia has a massive deposit, as does Nevada. But in most cases silver is a byproduct.
Even when present, many operations do not have the ability to extract the silver they’re digging up. Silver Wheaton (SLW) has helped in this regard though, as have higher prices. My understanding is that Freemont has a mine (or section of one) they’ve stopped production in until they can establish a means to extract the silver, due to the rich silver deposits.
Industrial use has (continues to) dwindled the amount of recoverable silver, adding pressure to the existing ratio. And silver reserves are very difficult to count, due to so much silver being held privately around the world. Speculation abounds, but many analysts perceive this to be another factor pointing to much less accessible silver in existence than markets allow for.
Paper trading, as readers likely know, adds a dynamic we’ve not experienced before. The artificial supply brought to the market has certainly had an effect. However, the degree may be impossible to quantify.
If/when hyperinflation does come, while it’s true that gold is a better transport of wealth and more universally recognized for its value, its tradability can be limited. In other words, if you need a loaf of bread at the supermarket and would rather pay with your metal than a wheelbarrow of greenbacks, it would be much simpler to take along a silver dollar, round, ingot, quarter, etc., than a sliver of gold.
We’re not saying that it’ll get that bad. But the point is clear. For small transactions, gold is simply too valuable to be practical. Furthermore, it could expose more wealth than is prudent, making gold owners targets.
Ultimately, it comes back to your personal philosophy. A core position in gold is a great idea because of its universal recognition and portability. Furthermore, it’s much simpler to store greater amounts of wealth in smaller areas. Small denominations are recommended by many for ease of trading.
However, if one already has a comfortable gold position, silver may be the trade of the century. If ratios return to historical averages, it could rise in value 300% more than gold does. And its lower value certainly makes it more conducive to small transactions. Of course, carrying or storing $20,000 in silver is much more difficult than the same value in gold.
Our friends at Goldco are happy to assist you in making these decisions. Give them a call and they’ll set you up.
For your prosperity,
J. Keith Johnson
The Gold Informant