The investment demand for precious metals keeps skyrocketing each year. And it should be skyrocketing when you look at the political and monetary environment.
The weird thing is the demand is getting higher but the prices of silver and gold remains pretty much the same . Every major currency is expanding in price and volume yet precious metals supply is diminishing in comparison. How can prices remain this low forever? Theoretically, it can’t.
Which means this may possibly be one of the greatest investment opportunities of all time. Time will tell.
The Federal Reserve has printed trillions of dollars out of thin air with their Quantitative Easing programs. Europe is now getting in on the Quantitative Easing action. There’s not enough investment grade precious metals to keep up with investment demand.
Heck, we could easily give another 20 reasons to invest in precious metals.
But which precious metal should you own? Should you get more gold or more silver?
The answer is simply yes. In other words just get either one because both metals have a correlation of over 80% to each other. The only way silver could be more compatible with gold is if it actually was gold.
Gold and silver prices go through wealth cycles. When deciding between the two metals, perhaps the best way to decide which one to buy is to look at the gold to silver ratio.
Throughout history, gold has naturally held a value 12 to 15 times the value of silver.
If the the price of gold is much higher than this historical ratio such as 70 to 1, then perhaps it is better to pick up more silver. If the price of gold is closer to 50 or 30 to 1, perhaps it’s better to pick up more gold.
For example, let’s pretend gold prices are $1300 an ounce and silver prices are $20 an ounce. You may want to consider getting more silver in this situation because the price ratio between the two is 65 to 1. Silver has a longer way to go to catch up to the historical 15 to 1 ratio.
On the other hand, let’s say gold is at $1300 an ounce and silver is at $43 an ounce. You may want to consider getting more gold because the price ratio is 30 to 1. Silver has a less way to go to catch up to the historical 15 to 1 ratio.
Either way is a possible win for you if you buying precious metal as an offset to currency devaluation.
By the way, check out #5 of the Ten Dangers of Investing.