GSR and other ratios

[vand]

18 minutes ago, DarkChameleon said:

You know much of the recent rise is tariffs and weakening currency...it's still good that they are acting as hedges but is it from people buying in record amounts?....not really, there is no problem finding gold or silver to buy so it's not demand causing the rise...that would be a nice way to make money but even better should we want to sell have the demand so much that we would have an easy exit...but  a rise is a rise.

Well, the price is what it is, and currency does not affect the GSR. As you say, it is doing its job as a hedge. It's the very reason you hold PMs.

 

22 minutes ago, sovereignsteve said:

yes but I was saying that when the GSR was less than 80😂

so it's just back down there then, hardly proves that it isn't mainly an industrial metal or that the GSR isn't useless.

It goes up, it goes down, whatever.

people who have strong fixed views are always looking for evidence to support their theories while ignoring contrary evidence.

and gloating at nothing special isn't really becoming.

I'm just having a bit of fun.

But it does underline my point about diversification; don't have all your eggs in one basket even amongst PMs. The real fixed view that I constantly see amongst the gold bugs here is their steadfast belief that gold is superior so you should just stick to gold ("just buy sovs"...zzz). It might be, but whether or not it you should choose it depends on the price. I think it's a good idea to hold some gold... but think it's even better to hold some Gold and some Silver. And it's even better to hold some gold, some silver and some platinum. You can accumulate whichever one is cheapest and change your buying accordingly. There have been ample opportunities to purchase all of them in the last few years at very depressed prices. I hold all 3. Right now at GSR 80.3 I'm fairly indifferent between them from a pure value point of view, but as I hold much more silver than gold I have a preference for gold to add balance to my holdings.  

[DarkChameleon]

I was referring g to the cost ride of gold and silver being magnified in britain....but yes, my gold hedges my silver or vice versa, my pm's hedge my investments in regular market and my investments in the market hedge.....

Buy I think we should hold generics and tradable pm's for exchanging as ratios or deals offer, make trades while the tide rises, makes the profit much more interesting and hedges against loses when the tide turns.

[sovereignsteve]

10 minutes ago, vand said:

I'm just having a bit of fun.

But it does underline my point about diversification; don't have all your eggs in one basket even amongst PMs. The real fixed view that I constantly see amongst the gold bugs here is their steadfast belief that gold is superior so you should just stick to gold ("just buy sovs"...zzz). It might be, but whether or not it you should choose it depends on the price. I think it's a good idea to hold some gold... but think it's even better to hold some Gold and some Silver. And it's even better to hold some gold, some silver and some platinum. You can accumulate whichever one is cheapest and change your buying accordingly. There have been ample opportunities to purchase all of them in the last few years at very depressed prices. I hold all 3. Right now at GSR 80.3 I'm fairly indifferent between them from a pure value point of view, but as I hold much more silver than gold I have a preference for gold to add balance to my holdings.  

yes couldn't agree more; diversify. although platinum is purely industrial, much more so than silver.

if you want to hold the metal, then gold is superior in most circumstances due to the low buy/sell spread. physical silver's spread is much too high to make it attractive for trading purposes, especially if you want to swap metals at various level of gsr.

[DarkChameleon]

13 minutes ago, sovereignsteve said:

yes couldn't agree more; diversify. although platinum is purely industrial, much more so than silver.

if you want to hold the metal, then gold is superior in most circumstances due to the low buy/sell spread. physical silver's spread is much too high to make it attractive for trading purposes, especially if you want to swap metals at various level of gsr.

Or ETF it.

[5huggy]

3 minutes ago, DarkChameleon said:

Or ETF it.

Not struck on using "PAPER" for Pm's - they are part of the manipulation factor

[DarkChameleon]

5 minutes ago, 5huggy said:

Not struck on using "PAPER" for Pm's - they are part of the manipulation factor

I don't mind using paper as a parcial trade mechanism...im not the prepper type.

 

[DarkChameleon]

9 minutes ago, 5huggy said:

Not struck on using "PAPER" for Pm's - they are part of the manipulation factor

Hers my son doin nightshift,  ouodnt post it on the messages cos im,on my tablet right now.

[5huggy]

28 minutes ago, DarkChameleon said:

Hers my son doin nightshift,  ouodnt post it on the messages cos im,on my tablet right now.

kids of today just have  better toys than we ever had! 🤣

Damned awesome tho

[KDave]

8 hours ago, vand said:

Wow. Fallen to 80.3 now.

Silver never ceases to surprise when it starts to motor. The moves are absolutely explosive.

For all those who doubted silver, for all those who said silver was just an industrial metal, for all those who says the GSR is useless:

 

The vand enthusiasm ratio now at extreme highs, a correction is imminent 

[5huggy]

GSR is this morning even lower at 79.494

Just keeps getting better at "the moment"

[HawkHybrid]

8 hours ago, vand said:

The real fixed view that I constantly see amongst the gold bugs here is their steadfast belief that gold is superior so you should just stick to gold ("just buy sovs"...zzz).

 

it's a fixed view to prudently make gains each

and every year since dec 2015 on your

investment(like gold has).

recklessly gambling on the fluctuations of

silver also has a place, maybe not as an

investment.

 

is it not a fixed view to recognise the

difference between the two?

 

what happens when someone buys cheap

something that doesn't fit with their strategy?

https://thesilverforum.com/topic/17703-sold-all-my-gold-got-stung/

 

HH

[vand]

48 minutes ago, HawkHybrid said:

 

it's a fixed view to prudently make gains each

and every year since dec 2015 on your

investment(like gold has).

recklessly gambling on the fluctuations of

silver also has a place, maybe not as an

investment.

 

is it not a fixed view to recognise the

difference between the two?

 

what happens when someone buys cheap

something that doesn't fit with their strategy?

https://thesilverforum.com/topic/17703-sold-all-my-gold-got-stung/

 

HH

 

My position has always been that I'm completely indifferent between them. This is the professional "position" to hold. I'll accumulate more of whatever I think represents the better risk/reward whilst still respecting my desired asset allocation. The market doesn't care what anyone's particular preferences are, so neither should you.

The prudent way to make steady gains is to hold a diversified and balanced portfolio. Diversification is often the only free lunch in investing. A well diversified portfolio is much stronger than the sum of its parts.

[HawkHybrid]

goldbugs are against holding a sizeable chunk

in silver because it's reckless to do so.

it's not because they are goldbugs and are

fixated on holding gold.

you're making it out like they are biased and

haven't worked out the maths.

they have worked out two things:

1. swapping gold for silver does not diversify a

portfolio.(silver amplifies golds peak gains)

2. silver is much more volatile than gold.

(much of the time it provides little to no returns,

and then it shoots to the moon)

 

holding silver is different to holding gold. they

are not exchangeable as the gsr suggests.

 

silver is a gamble, it is reckless to hold a large

percentage of pm's in silver as an investment.

people have successfully held a large percentage

of their pm's allocation to gold over the last 4,

20, 50 years.

 

silver is like buying the lottery, you get little to no

returns until you win, should you win, you win big.

 

recognise silver for what it is and allocate funds

accordingly. it is not an alternative to gold in a

portfolio.

 

HH

[vand]

2 hours ago, HawkHybrid said:

goldbugs are against holding a sizeable chunk

in silver because it's reckless to do so.

it's not because they are goldbugs and are

fixated on holding gold.

you're making it out like they are biased and

haven't worked out the maths.

they have worked out two things:

1. swapping gold for silver does not diversify a

portfolio.(silver amplifies golds peak gains)

2. silver is much more volatile than gold.

(much of the time it provides little to no returns,

and then it shoots to the moon)

 

holding silver is different to holding gold. they

are not exchangeable as the gsr suggests.

 

silver is a gamble, it is reckless to hold a large

percentage of pm's in silver as an investment.

people have successfully held a large percentage

of their pm's allocation to gold over the last 4,

20, 50 years.

 

silver is like buying the lottery, you get little to no

returns until you win, should you win, you win big.

 

recognise silver for what it is and allocate funds

accordingly. it is not an alternative to gold in a

portfolio.

 

HH

 

Yes silver is riskier and more volatile than gold in a portfolio, but the potential REWARD which is a function of the CURRENT PRICE makes it worth holding for those with the risk appetite to do so. If the GSR is 100 I'd advocate holding only silver. If the GSR is at 40 I'd advocate holding only gold. We have seen both prices in my lifetime.

But clearly you are wedded to your permalgold position, so I think we'll just agree to disagree. 

 

[DarkChameleon]

4 hours ago, vand said:

 

Yes silver is riskier and more volatile than gold in a portfolio, but the potential REWARD which is a function of the CURRENT PRICE makes it worth holding for those with the risk appetite to do so. If the GSR is 100 I'd advocate holding only silver. If the GSR is at 40 I'd advocate holding only gold. We have seen both prices in my lifetime.

But clearly you are wedded to your permalgold position, so I think we'll just agree to disagree. 

 

I think you're both right but you should as part of your holdings have that amount you can exchange when deals do come along, you don't have to go all in on either or sell all of one to exchange to the other....just like selling a chunk as small highs are reaches when your almost certain the price or ratio os about to change dramatically.

[vand]

The gold to oil ratio has spent a total of just 10 months above its current price of 29.64 since 1972.

https://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart

 

[JMD]

Hi Vand, your GSR model looks very intriguing. I am looking for a way to ‘trade’ the gold-silver-ratio, but not on a daily/weekly basis as I am not trader. Ideally for me I was looking to identify high/low ratios, and when to swop silver to gold and vice versa. So the clarity of your model looks ideal. I wonder if I could please ask a question?

Does the model only use a historical mean/standard deviation calculation, or do you also employ other indicators to help decide, for example, what the probability is of a given ratio rising further, falling, or perhaps has reached a peak. I realise such analysis would be probabilistic, but useful I think.

Do you have a website for your model where you go into more details, or perhaps even illustrate your own results from trading this model?             

[vand]

On 12/02/2020 at 16:34, JMD said:

Hi Vand, your GSR model looks very intriguing. I am looking for a way to ‘trade’ the gold-silver-ratio, but not on a daily/weekly basis as I am not trader. Ideally for me I was looking to identify high/low ratios, and when to swop silver to gold and vice versa. So the clarity of your model looks ideal. I wonder if I could please ask a question?

Does the model only use a historical mean/standard deviation calculation, or do you also employ other indicators to help decide, for example, what the probability is of a given ratio rising further, falling, or perhaps has reached a peak. I realise such analysis would be probabilistic, but useful I think.

Do you have a website for your model where you go into more details, or perhaps even illustrate your own results from trading this model?             

The model is only based on moving averages, so relies on historic prices only to form the basis of the boundaries based off the current price.

Importantly, it also doesn't account for any transaction costs or tax implications of switching your position, which should also be taken into consideration.

I asked the question: if I had invested, say 35% of the median US since 1968 what would might my portfolio and wealth look like?

I was surprised my what I found:

 

Step 1. Intially I started with a simple model of buying a fixed quantity of gold/silver.

A. Total value of a silver-only portfolio would be approx $530k today

B. Total value of a gold-only portfolio would be approx $945k today

 

Step 2. Then instead of using a fixed amount, I switched to a more conventional cost-averaging approach. This yielded some improvement, and shows the power of cost-averaging over a long timeframe.

C. Total value of a silver-only portfolio would be approx $751k today

D. Total value of a gold-only portfolio would be approx $1.106m today

(note the gains for the silver portfolio are greater than for gold only, as silver is more volatile.. still, even this can't make up for silver's long term underperformance vs gold)

 

Step 3. Buy either gold OR silver (cost-averaged) based on historical GSR.

OK, so now we're into a mixed asset portfolio, and you'd expect to see some bigger returns. Nope. Silver's relatively poor performance means that there was very little reason to buy silver at all expect during some very brief periods and since 1968 it will have had a very small impact on your total portfolio performance.

E. Total portfolio value of mixed portfolio with no swapping: $1.2m

 

Step 4. Modify previous model now allowing for swapping either some or all of your position from one metal to the other when the GSR moves above/below a fixed price.

Surprisingly this was little improvement on the previous model. Again the reason is that if you had used a rigid fixed GSR to determine when you swap, over time you would have simply ended up all in gold because of gold better longer term outperformance. What was once an extreme GSR price 30 years ago became a normal price today. 

F. Total portfolio value of mixed portfolio with fixed boundary swapping: $1.27m

 

Step 5. Modify previous model; now instead of using a fixed GSR price to determine swap boundaries, use a flexible GSR price based on a long term moving average.

This is where I found a huge jump. By adjusting the swap boundaries from static to a moving price (similar to a bollinger band) the swap boundaries are much more meaningful and based on the most current prices rather than almost irrelevant historical prices.   Importantly, I quickly found that setting extreme swap boundaries which generated relatively few signals also resulted in the best overall long term performance. As established, most of the time you would have spent in gold for the reasons already detail in the previous models, but the model also did good job of moving you out of gold and into silver on those few occassions when silver materially outperformed, and then got you back into gold at the equally important times when silver got crushed over the ensuring bear market.

G. Total portfolio value of mixed portfolio with variable boundary swapping: $5.9m

 

I did develop the model a couple of step further to vary the buying size based on how expensive gold was compared to the average wage, also to implement hedging that tried to protect the portfolio from sizeable drawdowns based on accelerating downward momentum of the gold market. Between them these added further gains to $10m+ to the model portfolio, but in practice I am much less certain about implementing those recommendations, and in practical terms you are better advised to consider your PM asset allocation in the entire universe of investible assets. 

 

[vand]

Also, I will hold my hands up and point out that it's just a model. Models invariably never perform as well going forward as their historical backtested performance. 

My models also say buy sell palladium and buy platinum.. that one hasn't played out well so far. We'll see how it looks in 5-8 years' time, but it just shows you that markets will do what nobody expects of them. 

[JMD]

Thank you Vand, really fascinating to see the big variation in investment outcomes - depending on chosen strategy.

It’s also interesting to read how the GSR is ‘increasing’ over time. I may have your GSR-bands (sorry if using incorrect term) slightly wrong as I simply approximated them from a chart you posted in 2018 (I believe that was the year), however I think they were (excuse formatting)-                                                                                            swop gold for silver            : 90+                                                                                                                                   buy silver                            : 80-90                                                                                                                               buy both gold and silver     : 60-80                                                                                                                               buy gold                             : 50-60                                                                                                                                swop silver for gold            : <50                

I wonder if you could tell me what these figures are currently?

[vand]

On 21/02/2020 at 18:18, JMD said:

Thank you Vand, really fascinating to see the big variation in investment outcomes - depending on chosen strategy.

It’s also interesting to read how the GSR is ‘increasing’ over time. I may have your GSR-bands (sorry if using incorrect term) slightly wrong as I simply approximated them from a chart you posted in 2018 (I believe that was the year), however I think they were (excuse formatting)-                                                                                            swop gold for silver            : 90+                                                                                                                                   buy silver                            : 80-90                                                                                                                               buy both gold and silver     : 60-80                                                                                                                               buy gold                             : 50-60                                                                                                                                swop silver for gold            : <50                

I wonder if you could tell me what these figures are currently?

I wont get a chance to update the numbers for a few weeks but I suspect the swap boundary will be around GSR 92 as things stand right now. 

[sovereignsteve]

and will it keep increasing😉

[goldking]

Just now, sovereignsteve said:

and will it keep increasing😉

Don't say that Steve, you'll have the silver fanboys in tears. 

[JMD]

16 hours ago, vand said:

I wont get a chance to update the numbers for a few weeks but I suspect the swap boundary will be around GSR 92 as things stand right now. 

It will be interesting to see the latest numbers and how they compare to the 2018 ones. I am still formulating my strategy for making use of the GSR and this will help me a lot. Thank you again.  

[sovereignsteve]

Almost at 92 guys

21 hours ago, vand said:

wap boundary will be around GSR 92