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Silver and Gold

Hi folks,

A couple of articles that might be of interest. The first points out that with interest rate returns at zero, the opportunity cost of owning gold is also zero. Throw in the virus and political uncertainty and it's easy.

The second mentions the GSR (gold silver ratio). This is the historic exchange rate between the metals and for 100s of years has been 1 to 15. As I write, it's 1 - 83. While I don't think we'll ever get back 1-15, this ratio favors silver over gold on a relative basis. I concur. He also mentions leverage and rono jumps up and down in gleeful agreement. If indeed, we're beginning a bull market in the precious metals, the max leverage is with silver miners. Of the authors list, I've owned 7 over the years, mostly during the Big Bonanza running from 2002 to 2011. We're right on the verge of breaking above those highs but no where near the all time for silver. This occurred back in 1980 when the Hunt Bros tried to corner the market. Silver went to ~$50. Gold's all time was hit in 2011 at ~$1920.

https://www.bloomberg.com/news/articles/2020-07-22/ever-lower-u-s-bond-yields-are-driving-gold-s-relentless-rally

https://seekingalpha.com/article/4360107-9-silver-miners-are-basket-of-opportunity

and so it goes,

peace and wear the damn mask,

rono
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Comments

  • Is it too late to get in since precious metals are reaching high now? Mining companies or the metals themselves? Your opinion is most appreciated.
  • @rono- Hi, Ron- have you any thoughts as to why the GSR is presently so high?

    Other than the corner mail box we've gone out of the house about six times since March, but if we do, it's sure as hell mask time.

    OJ
  • Howdy folks,

    Sven.

    I have always recommended folks have a core holding of bullion in the 3-10% range. Whatever helps you sleep at night. More than this is speculation.

    In the grand scheme of things, best is physical hands on bullion. I deal with Apmex because it's easy. Right now the premiums (difference between paper price and street price) are very large. In addition the delivery delays are large. Basically, buyers are lined up for blocks.

    In the reality of investing/speculation, I much prefer the mining stocks over the bullion ETFs. Most mutual funds that cover the metals own mining stocks and not bullion. I do own CEF which is a pure physical bullion play that I trust and I own a bit of SLV as a momentum play. Otherwise, I go with the mining stocks. I do NOT trust the bullion ETFs.

    I prefer to play individual stocks and take fiendish delight in playing the junior silver penny stocks. For most people, you want to go with a mining stock ETF. GDX and GDXJ for gold miners and junior gold miners and SIL and SILJ for the silver miners and junior silver miners.

    http://www.kitcosilver.com/equities.html

    Please note that these can get extremely volatile.

    Good luck.

    Dan. Hope this finds you well and safe. We're laying low but we've got 'that woman from Michigan' looking after us.

    GSR. Wow. I've been thinking it was nuts since at least 2002 when the Big Bonanza started. Now it's 83 to 1. I don't see it ever going back to 17 to 1. I read someone posing 50 to 1. I don't know. When they stopped 'officially' setting the POG the market has been setting it. I know the ETFs have had an impact. WTF knows?

    I read Silver is undervalued relative to gold. For someone buying ounces, the easy way to play this is buy in RATIO. Dollar Cost Average - buying bullion at the GSR. 83 ounces of silver for every ounce of gold. When it changes, change your buy ratio.

    Take care. How close to Oakland are you?

    and so it goes,

    peace,

    rono







  • @rono, Thank you. We have some exposure to gold and silver bullion through IAU and PRPFX. As bond yield drop so much we increased allocation to precious metal several years ago. Just wasn't how how much is sufficient for downside protection. Don't have experience of how they hedge against inflation. Pick up some TIP early this year. Like you we have been selling equity since the peak of recovery. Take care of yourself. We wear face mask like you do.
  • @rono- About 30 minutes. I commuted to work there for many years.

    d
  • Howdy folks,

    Things are getting interesting people. As I write, gold is up over 2% while silver is up this morning over 7%. Perfect storm for the metals considering things going on around the world.

    Several good articles but always consider the source.

    https://www.kitco.com/news/2020-07-26/Gold-price-makes-history-hits-all-time-high-and-analysts-still-looking-for-more.html


    https://www.marketwatch.com/story/gold-shoots-30-higher-to-fresh-record-above-1900-2020-07-27?mod=home-page

    and so it goes,

    peace and wear the damn mask,

    rono



    Dan. I have a new FB war buddy that lives in Oakland. Retired mailman.

  • Rono: In the grand scheme of things, best is physical hands on bullion.

    Why physical is best when you look at shipping, storing and delay trading? Why not simple GLD(or other gold related positions) where it's so easy to own and trade.
  • I must have given the “buy” signal when I sold some 3-4 weeks back.:)
  • Howdy folks,

    Profit taking seems to be happening today, or as Art used to call it years ago, 'backing and filling'.

    FD1000. As regards physical vs. paper bullion, there are a lot of issues.

    First off believe everyone should own 3-10% gold and silver as a core investment. More than this is speculation. Both are fine but keep them separated in your mind.

    I don't trust most of the bullion ETFs for anything other than short term trading and momentum speculation plays. I do NOT consider them to be real bullion for investment or core holding purposes. Too many accounting issues and double and triple counting of reserves. Cripes, there are days, when the short interest exceeds the known quantity of the actual metal available. Really?!? It's not a conspiracy, per se, but simply the fact that there are governments and central banks and major players that are legally able to manipulate the market to their advantage. Hell, most of us would, if able.

    This manipulation is expressed in the difference between paper price and street price. Right now the street is pricing PMs much higher than the paper price. In addition, there are enormous delivery delays for bullion. The paper prices are artificially low and the market shows it.

    This is copied from Liberty Coin Service's FB page.

    "This technically has to be a rumor. Apparently the US Mint has already received orders from primary distributors for all the gold and silver bullion-priced coins it could hope to manufacture through the end of 2020.

    If true, this does not mean that the rest of the 2020 mintages have already been committed to fill existing retail orders. However, it does signal just how strong physical gold and silver demand is right now. The COMEX gold futures market traded an extraordinary 600,000 contracts today--greater than the total open interest.

    This coincides with reports we are getting that supplies of silver bars are getting multiple months delay in delivery after payment. One primary distributor told us today nothing they fabricate would be shipped before December if bought and paid for today."

    As for real hands on bullion, it's not really difficult. A roll of American Gold Eagles is a little larger than a quarter and stands about 2.5". You can hide it in the box of oatmeal. Cost today? About $40K. A 100 oz. ingot of silver you can paint black and use as a door stop. Cost? About $2500. Gee, you can buy some plain vanilla bling.

    With regards my plays in the ETFs, I love the Sprott family and own CEF. I am momentum playing SLV.

    good luck,

    and so it goes,

    peace and wear the damn mask,

    rono
  • edited July 29
    Sold remaining position in OPGSX (miners). Nice ride last 2-3 years. Getting nutty now. Split proceeds between Invesco’s commodity fund (existing position) and global infrastructure (new).

    Rest assured, I have absolutely no control over the markets. You can expect gold to climb to dizzying heights now.
  • I took some profits from my stake in IAU about a month ago @hank. I guess never a bad thing to do, but I took some profits at 16.5/share. It closed today at 18.8. Oh well... Still IAU is about 6% of my self managed portfolio. I think this bubble still has plenty of room to expand.
  • Howdy folks,

    As old Art used to say, "you can never go broke taking profits ".

    Seems others are too. Good.

    And so it goes

    Peace and wear the damn mask.

    Rono
  • @rono: I'd vote for you if I lived in your township. I wish more candidates would pledge to require masks.
  • If I sell 100oz silver bar at a local gold/silver buyer how close to the spot price should I expect to get?
  • Howdy folks,

    royal4 here's yesterday's price listing from my local dealer. It's a good rule of thumb.

    http://libertycoinservice.com/wp-content/uploads/quotes/daily_quotes.pdf

    Please note that quality of the mint is very important in bullion. You pay more for name brand stuff but sell it for more also. You can almost buy and sell American Eagles at your local McDonalds, but try to sell that 1 oz silver round from BillyBob's Mint and Whoopy Parlor and you might have a tough time. Drink from the Top Shelf my friend.

    and so it goes,

    peace and wear the damn mask,

    rono



  • Every time I moved, I cursed lugging around my silver and gold accumulations.
    So, I sold all of it and now have a slim bitcoin wallet. And I can spend it at Burger King and Subway, though I have not tried McDonalds. Bitcoin is top shelf now.
    Thank you for wearing a mask.
  • Not an easy area in which to dabble. Remember Rocky Peak Small Cap Value Fund? Done in by miners shortly after launch.
  • edited July 31

    Every time I moved, I cursed lugging around my silver and gold accumulations.

    And you were no doubt moving into bigger and bigger homes. Must have been tough lugging all that stuff up all those higher and higher staircases.:)

    It was nuts in the 70s. Everybody was talking about gold as it rose to over $800 (January 1980). I bought a couple K-Rands near the top and held them all the way down to $350-$400 before off-loading them. I guess as lessons in investing at an early age go, it was probably worth the cost.
  • edited July 31
    As @Rono knows, I've got several hundred dollars worth (face value) of "real" silver quarters sitting here in a box. "Worth" a fair amount these days. But what good are they? If I take advantage of the current upswing I can convert those "real silver" quarters into lots of "phony" paper dollars that can't earn any interest at the present time, and at the rate we're going, won't be worth much in the future.

    So I guess that they'll still be sitting in that box when I croak.

  • @Old_Joe: I didn't know you're a frog !? LOL
    Derf
  • @Derf- I'm definitely NOT French! I'm an Irish / Italian mongrel. :)
  • Howdy folks,

    Sitting right at the magic number of $2000 for gold. We'll see. Here's a nice article that does differentiate the various aspects of demand that are driving the market. One clarification that needs to be made is regarding the authors citing the last time gold and the market moved in tandem was 1979-80. They did move in tandem but coincidentally. This was when the Hunt Bros. were attempting to corner the silver market. I was finishing my degree in Econ financed by the GI bill and proceeds of selling the silver stash of coins I had stashed during my 4 years in the restaurant biz. This was the all time high in the price of silver as it hit $50 in January of 1980.

    https://www.marketwatch.com/story/what-does-a-stratospheric-rally-for-gold-mean-for-the-stock-market-11596220080?mod=home-page

    And here's one for your morning giggle. This clown is my state senator. He's a religinazi creep. He's been fighting the shutdown and 'that woman from Michigan'.

    https://www.freep.com/story/news/local/michigan/2020/08/02/michigan-gop-senator-tom-barrett-positive-coronavirus/5569293002/

    teefknghee,

    and so it goes,

    peace and wear the damn mask,

    rono
  • Will see how Mr. Barrett fares now that he tested COVID positive.

    Brazil's Bolsonaro has found molds in his lungs after tested positive COVID. His wife also tested positive. They are treated with antibiotics.
    https://cnn.com/2020/07/31/americas/brazil-bolsonaro-mold-lungs-intl/index.html
  • edited August 3
    Nothing here about Herman Caine who died of Covid last week. Folks are steering clear of linking his illness / death to his attendance at Trump’s Oklahoma event, though he fell ill just a week or two after attending Story. Tragic any way you cut it. Too tragic to laugh at. What can you say when folks prefer blind faith over science?

    “Faith is a fine invention for gentlemen who see. But microscopes are prudent in an emergency.”
    (Emily Dickenson)


    $2,000 seems to be a significant resistance point for gold. At some point it blows through and continues to the moon. I’d love to reopen a small position (miners) on a significant pullback in the next few weeks.
  • Hi hank,

    How are things up North now that 'that woman from Michigan' closed the bars. Hell, my Baltimore Orioles even came back early. Normally, they arrive around May 1, stay for a month or so and then head on up to their cottages up north. They pass back through on the way south in the early fall. This year, they started coming back last week. The one looked at me as if to say, Hell, she closed the bars, we came back your your house.

    So much for resistance at $2000. We'll see if it holds up through the weekend or not. For everyone who thinks it should go higher, there are those that believe the opposite.

    The other thing that's happening is the Gold/Silver ratio is dropping as we speak. It was down to 71 yesterday and was over 90 when this began. Historically, it's 17 but I don't see it ever getting back to there. One writer suggested around 50 was probably most appropriate but who knows. Regardless, silver's on a tear right now.

    Frankly, it's all a momentum play for me. That's been the way I've invested since Gary Smith (How I Trade for a Living) taught us about on on one of the predecessors to this board. Find a divergence in the market, make a small bet and watch it. Only add to it as it goes up, never down. Keep scaling in as long as it's going up and until you reach your target investment. When it starts going down, start scaling out. feh. It's really not rocket science and if you do this with a small portion of your otherwise wonderfully allocated portfolio, you can juice your returns. If the divergence is the beginning of a nice trend, you can ride it a long way. You don't have to get on at the beginning nor stay to the end. You just have to ride that sucker while you can.

    Will this be the start of a another major bull market in the metals. WTF knows? I'm just riding the mo.

    and so it goes,

    peace and wear the damn mask,

    rono

  • edited August 7
    I rather like “That woman ...” :) The other one too (Nessel).

    Folks could do a lot worse than to heed the advice of old veterans Gary & Rono.

    My thoughts on gold. Bill Fleckenstein, who I follow, has been hot on the precious metals / miners for several years. I haven’t reduced my hold in PRPFX - which goes more into bullion holdings than the miners. I played in the miners for about 3 years. Gold was around $1500 when I got in. Since than its been an up & down market. Traded in and out. Did well. If miners never correct, I’m fine. Should they correct, I’ll nimbly get back in. Fingers been burned a few times over the past half-century - so wary.

    Today, gold’s taking a breather. Off $20+ around noon. Miners off about 2.5%. Yesterday gold rose slightly, but the miners fell a bit. What I think’s driving the retail side (Joe Investor) at this point is geopolitical fear more than the financial reasons often cited by the pundits. Many folks don’t trust their leaders. Many harbor fears about the upcoming election, constitutional issues, mail-in ballots. The already heated rhetoric that will only get worse. Normally about now you’d expect the “big-boys” to shake the vines and try and clear out the low hanging fruit. Might be harder to do at this point because of the intense retail interest gold / silver has now generated. But looks like they’re giving it a try right now.
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