Why Silver?

April 25, 2012

The question people often ask me is, “why silver?” They always assume gold is the only precious metal really worth investing in. Now, I will deal with “why gold” tomorrow, but for today, let’s just address some issues that give us a gold bias:

1. Ever heard of San Francisco 49ers? 1849 – The Gold Rush! In America, we have mined coal, and we have mined gold!

2. We never hear of “the silver standard.” There is always “the gold standard.” Gold is what backed our currency for the first 150 years (you know, the time when there was no such thing as inflation, and our currency was worth something more than toilet paper)

So, that’s why we are apt to say – gold, gold, gold!

Now, back to the title – WHY SILVER?! Well, simply stated, silver has always been side-by-side with gold as money. Gold and silver are God’s money. Money that we dug up from the ground. Silver is listed as money in Biblical times. A denarius or its plural form denarii, are found all through out the Bible, because there was no “currency” there was money, and it was silver and gold. When Judas betrayed Jesus, it was given to him in silver. These are not merely coincidences, that they didn’t have any Rome Dollars on them, it is that they understood gold and silver to be money. As the United States came into existence silver coins were used as money, and even until 1964 silver was put into coins to back its value!

With our understanding that silver is money, we must look at what I consider the most important question in this argument. What is silver worth? Well, right now in US Dollars they say silver is worth $31.80, back two years ago silver was worth $20, and they further you go back the lower the assigned US dollar value is. This is because inflation is alive and well. Inflation doesn’t mean that “prices are going up” it means that YOUR DOLLAR IS WORTH LESS (and will soon be worthless). So, what we must do is look at money-to-money value or money-to-house value. (For this claim on why gold over silver I will compare the historic ratio of gold:silver) During the Roman Empire the exchange rate was 1oz of gold per 12oz of silver. Simply stated if an ounce of silver was worth $10, an ounce of gold would be worth $120! In 1792 when The United States of America was first beginning to form itself, we passed a law declaring the value would be 15:1. So, taking the same 1oz as above, if 1oz of silver was $10, then 1oz of gold would be $150. In 1803 France followed suit and made their silver/gold ratio at 15.5:1.

Before I continue making my claim for silver I want to pause to explain why gold has been viewed at as more valuable than silver. Is it because gold is prettier? If that was so, why are they making gold that’s white and closer to the color of silver than yellowish gold! Is it because it’s a better metal? Silver in it’s purest form is more durable than 22k or 24k gold. If you drop 24k gold it will more than likely dent! Well, let me cut to the chase. Gold has always been rarer than silver. Above ground gold to silver always explained the ratios of 15:1.

This is where I get excited. As I’m typing this there is LESS above the ground silver used for investment than gold! We have been using silver and throwing it away at an astronomical rate! Silver is a common component in computers, phones, house appliances, and many other things that get used and then thrown away.

So, what does that mean for us now? Silver is at $31.80, gold is at $1,640. That’s a ratio of 51:1! And the only reason gold should be more expensive than gold is because something that was historically true (rarity), but is now no longer true! My prediction is that silver and gold will seek it’s balance of the 1700-1800s around 15:1, now, if we get lucky and get best case scenario it could easily go to 10:1, and if the stars align, LOGICALLY, there is no reason that gold and silver based off the amount that is available above ground gold and silver, that the ratio could be 1:1.

Let that sink in for a little while.

 

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