Where to Be If/When the Metals Markets Explode – Part 2

This week we’ve been discussing some interesting dynamics in the metals markets. Yesterday we looked at a few options regarding mining stocks. With the information and links we’ve provided, it’s our desire that the investor will be able to research the possibilities regarding this kind of investing.

As promised, today we’re in what we consider to be more our own element. While mining stocks can be exciting and offer much for a stock portfolio, our focus is on ownership of actual metals. With this in mind, today we’ll take a look at the silver to gold ratio and some considerations in regard to limited production.

Silver to gold ratio – This is something I keep an eye on and have mentioned before. Though it doesn’t demand constant attention, I strive to recognize the trend in order to be prepared for to adjust accordingly.

Currently the silver/gold ratio is around 55/1. A few years ago we saw it as high as 70/1. However, historically it’s usually about 14+/1, which roughly is consistent with its availability in the earth.

An additional dynamic that challenges us in this regard is the fact that silver is being consumed industrially at a much higher rate than gold. Some research indicates that the rate at which this has happened has actually upset the historical balance, rendering the true above ground ratio much lower. Figures are difficult to come by, so it’s hard to know for sure what this will mean in the long run. But it’s certainly something for us to consider as we assess our portfolios.

Based on this alone, it may be more advantageous to focus on silver than gold at this time. Silver is certainly the more volatile of the two, offering more opportunities for short trades. Be careful here though, because silver’s movements have shown a tendency to lag gold’s.

Silver is also more affordable for the common man. Furthermore, based simply on the ratios and industrial use of silver, it may prove to be the better investment in the long-term as well. This should become clearer as metals gain more attention from experts and investors alike. This new article from Casey Research supports our observations as well.

How to play this is dependent, again, on the individual. One way that some play it is to simply watch the ratios and move from GLD to SLV, as both of these are supposed to be representative of actual metals. Another, of course, would be to take possession, trading at ratios you are convinced would be profitable for you. This can be difficult because dealers have to make a profit, meaning that there must be some significant movements to make trading worthwhile.

Supply and demand – This is focused primarily on silver as well. As we noted yesterday, demand for silver appears to be overtaking supply. This is certainly true in the U.S. and Canada. Whether or not the same dynamic is worldwide is worth further research. If we can obtain international numbers we’ll inform readers immediately.

The play on this aspect is fairly simple. Buy silver coins, SLV and perhaps mining companies that have a great deal of silver production. Some see Silver Wheaton as a great silver play. If you go with miners, keep in mind that silver is most often a by-product of other pursuits, such as copper mining.

You can put all of these investments into various accounts as well. Your IRA can handle stocks, ETFs or even possession of physical metals. And, of course, there may be no substitute of taking personal possession of metals. This, too, depends upon your ability to store and how much you desire to own.

You may prefer coins that are at or very close to their weight value, or perhaps some more exotic collectibles. Both have merit and should be considered for different reasons. We’ll discuss the pros and cons of numismatic premiums in a future article. Again, we’d encourage you to do your research in order to understand more clearly what would work best for your situation and goals.

If you’d like more information on owning actual coins, whether in an IRA or delivered to your home, our friends at Goldco Direct can help. Give them a call or fill out the contact form and they’ll be more than pleased to provide whatever information they can to help you preserve your wealth.

For your prosperity,
The Gold Informant