The Gold Silver Ratio

[LawrenceChard]

I have posted this under Precious Metals: Silver, but it could equally have gone into Precious Metals: Gold.

Precious Metals: General Precious Metals would almost have been good, but this discussion is not about platinum or palladium.

It is only partially relevant in the topic: "Silver Monitoring Thread £ (GBP) only", as the discussions about the gold:silver ratio transcend discussions in pounds. The same applies to "Silver Monitoring Thread $ (USD) only". The price of either metal expressed in GBP, USD, JPY, EUR, CNY, AUD, or any other fiat currency might be important to investors in those countries, but is a parochial view, and not of primary relevance when considering the relative value of gold and silver to each other.

Sure it is very common, and entirely normal, to calculate the gold:silver ratio by taking the prices of gold and silver in any currency whatever, as long as you use the same currency for both, and at the same instant in time, then dividing the gold price by the silver price. You should always get the same answer. Any difference may be because arbitrage positions in either or both metals in different geographical locations, creating slight price differentials in local currencies.

Although I am British, I would advice that where there are any differentials between G:S in different currencies, then the calculations based on US Dollar prices should be preferred, because like it or not, both metals are traded and quoted primarily in American Dollars.

Now, having got that out of the way, down to business:

I have added many posts in different Topics about the Gold:Silver ratio, including a few when it went over 100:1 for the first time ever.

I can no longer find most of these TSF posts. I can rely however on some information and advice pages we published on the Chards website.

This page:

https://www.chards.co.uk/blog/gold-silver-ratio-and-its-effect-on-silver-price/241

states:  "in March 2020 it peaked at about 121:1", but I notice that at 13.00 on 8th May 2020, it was 112.30.

I also recall seeing higher intraday rates between 124 and 128. I may now need to do some more research to find examples.

I am aware that in September 2021, there was a TSF post "The Gold/ Silver Ratio Explained – Is Silver a Better Investment Than Gold?", written by pseudo experts in a rather sickly, condescending matey style, which failed in its heralded headline aim. It did not explain the ratio, and it also failed to answer the second question posed in the title. But them, I was not surprised.

Our own, very concise blog page above is, in my possibly biased opinion, a far easier read.

There is alo more on our linked page:

https://www.chards.co.uk/gold-silver-ratio

Which shows the spot G:S ratio.

I was actually spurred to post this new topic because the ratio has just gone back up over 90:1

Please feel free to contribute any and all thoughts about the Gold:Silver ratio here.

😎

 

 

[flyingveepixie]

I'd like to sell some of my silver bullion but there's no point as it's now worth less than what I paid for it, and that's before you take into account the VAT rip off.

 

[LawrenceChard]

1 hour ago, flyingveepixie said:

I'd like to sell some of my silver bullion but there's no point as it's now worth less than what I paid for it, and that's before you take into account the VAT rip off.

 

I wish I / we could do something about the VAT in the UK / EU, but...

There is always offshore storage, but it is not economical for smaller values, in fact I don't know what the threshold is, I need to check, then remember.

I am not pushing it, as the bigger investors who use it are almost always "sold" on it before they contact us.

 

[LawrenceChard]

2 hours ago, flyingveepixie said:

I'd like to sell some of my silver bullion but there's no point as it's now worth less than what I paid for it, and that's before you take into account the VAT rip off.

 

 

41 minutes ago, LawrenceChard said:

I wish I / we could do something about the VAT in the UK / EU, but...

There is always offshore storage, but it is not economical for smaller values, in fact I don't know what the threshold is, I need to check, then remember.

I am not pushing it, as the bigger investors who use it are almost always "sold" on it before they contact us.

 

I just thought:

Most TSF members will not know this, but between 1973 and 2000, there was VAT on gold coins and bars!

More info here: 

https://taxfreegold.co.uk/newsaboutinvestmentgold.html

😎

[Stuntman]

Silver currently seems very cheap to me, relative to gold.  I'm seeing this as a potential buying opportunity in my silver ETF.  

Platinum currently is virtually half the price of gold.  Ditto as a potential ETF buying opportunity.

Only trouble is that I don't have much spare cash because of the cost of living crisis, and the price of all my other risky investments continues to tank 🙄

[Dom]

5 hours ago, LawrenceChard said:

I wish I / we could do something about the VAT in the UK / EU, but...

There is always offshore storage, but it is not economical for smaller values, in fact I don't know what the threshold is, I need to check, then remember.

I am not pushing it, as the bigger investors who use it are almost always "sold" on it before they contact us.

 

Why is VAT such a big deal breaker when it comes to buying silver? I get that you're effectively paying 20% over the odds but when the true value of an ounce of silver is likely in the 3 figure range why do people begrudge paying 20% vat on a £25 ounce of silver? Paying £30 inc vat as opposed to £25 exc vat is surely inconsequential when silvers true value is several times more than £25 no? 

[Slam]

8 hours ago, Dom said:

Why is VAT such a big deal breaker when it comes to buying silver? I get that you're effectively paying 20% over the odds but when the true value of an ounce of silver is likely in the 3 figure range why do people begrudge paying 20% vat on a £25 ounce of silver? Paying £30 inc vat as opposed to £25 exc vat is surely inconsequential when silvers true value is several times more than £25 no? 

I'm gonna try to answer this as a new stacker and supposedly a rising star, 🤣. However not saying its 100% correct its just my opinion. 

Take for example 1 oz of silver coin, its true value is and always will be 1 oz of silver. Fiat currency is used as a tool to gather silver, so using less fiat to gain more silver oz's is the best way to go.  VAT doesn't add value to the silver content so that's why i think a lot of people are put off by it, a 3rd party is taking a bit of your pie lets say just because they make up the rules for the majority. 

For me I look at the final price I can buy at, that includes the physical silver, premiums, tax and shipping costs (All tools used by 3rd party to add their own value to the physical silver).

Also 20% VAT is a sizeable chunk of the pie, that is a loaf of bread, 4 pints of milk and a packet of Ham to feed the family for a few days (2022).

I can now see why its a deal breaker for many. 

Maybe a more experience stacker / collector can confirm if my thinking is correct?

 

 

 

Edited July 2, 2022 by Slam

[ArgentSmith]

12 hours ago, Stuntman said:

Only trouble is that I don't have much spare cash because of the cost of living crisis, and the price of all my other risky investments continues to tank 🙄

“There are two times in a man's life when he should not speculate: when he can't afford it and when he can.” ~ Mark Twain 🤔

 

[MetalMandible]

All I know is if that ratio goes over 100:1, I shall be backing up the ol moped.

[flyingveepixie]

1 hour ago, Slam said:

I'm gonna try to answer this as a new stacker and supposedly a rising star, 🤣. However not saying its 100% correct its just my opinion. 

Take for example 1 oz of silver coin, its true value is and always will be 1 oz of silver. Fiat currency is used as a tool to gather silver, so using less fiat to gain more silver oz's is the best way to go.  VAT doesn't add value to the silver content so that's why i think a lot of people are put off by it, a 3rd party is taking a bit of your pie lets say just because they make up the rules for the majority. 

For me I look at the final price I can buy at, that includes the physical silver, premiums, tax and shipping costs (All tools used by 3rd party to add their own value to the physical silver).

Also 20% VAT is a sizeable chunk of the pie, that is a loaf of bread, 4 pints of milk and a packet of Ham to feed the family for a few days (2022).

I can now see why its a deal breaker for many. 

Maybe a more experience stacker / collector can confirm if my thinking is correct?

 

 

 

Well I'll certainly endorse your logic. It makes a lot of sense to me.

Edited July 2, 2022 by flyingveepixie

[Dom]

1 hour ago, Slam said:

I'm gonna try to answer this as a new stacker and supposedly a rising star, 🤣. However not saying its 100% correct its just my opinion. 

Take for example 1 oz of silver coin, its true value is and always will be 1 oz of silver. Fiat currency is used as a tool to gather silver, so using less fiat to gain more silver oz's is the best way to go.  VAT doesn't add value to the silver content so that's why i think a lot of people are put off by it, a 3rd party is taking a bit of your pie lets say just because they make up the rules for the majority. 

For me I look at the final price I can buy at, that includes the physical silver, premiums, tax and shipping costs (All tools used by 3rd party to add their own value to the physical silver).

Also 20% VAT is a sizeable chunk of the pie, that is a loaf of bread, 4 pints of milk and a packet of Ham to feed the family for a few days (2022).

I can now see why its a deal breaker for many. 

Maybe a more experience stacker / collector can confirm if my thinking is correct?

 

 

 

That makes perfect sense bud, never actually thought of it like that, I think you've answered my question. We are being robbed lol. 

Even though there is VAT on silver would you and anyone else reading this not agree that silver is still a better purchase than gold in terms of bang for your buck? Just talking in a pure value for your money sense ie you get more value by purchasing silver inc the VAT than you do by buying gold exc VAT?

[LawrenceChard]

11 hours ago, Dom said:

Why is VAT such a big deal breaker when it comes to buying silver? I get that you're effectively paying 20% over the odds but when the true value of an ounce of silver is likely in the 3 figure range why do people begrudge paying 20% vat on a £25 ounce of silver? Paying £30 inc vat as opposed to £25 exc vat is surely inconsequential when silvers true value is several times more than £25 no? 

The true value of almost anything is its market price, how much you can buy or sell it for.

Silver is a commodity, and the spot price quoted reflects its true value at that moment. Sure, in line with all commodities, prices fluctuate constantly, with silver prices being more volatile than most. Silver can be traded on the commodity markets within a few pence, cents, or percentage of its spot price. Volume trades occur every day markets are operating, which is upward of 250 days per annum.

Perhaps you believe that silver should be worth over £100 per ounce, and it may eventually trade at that, for brief periods at least; but this is belief not fact. I don't wish to insult you, but you sound as though you have been brainwashed by the "silver pushers" who continually publish lunatic fringe forecasts about the silver price, and other fake news.

Coming down to earth, sure if you collect or stack one ounce silver coins, for example, then £30 compared with £25 is not the end of the world. If on the other hand you are a serious investor spending say £100,000 on silver, then forklng out an extra £20,000 makes absolutely no sense.

If this has failed to alter your opinion, and I suspect it will not, then I can happily offer you a whole load of half price silver, at just £50 per ounce, and as you know it is worth way more than £100 per ounce.

Why?

I'm just a generous guy!

😎

[LawrenceChard]

16 hours ago, Stuntman said:

Silver currently seems very cheap to me, relative to gold.  I'm seeing this as a potential buying opportunity in my silver ETF.  

Platinum currently is virtually half the price of gold.  Ditto as a potential ETF buying opportunity.

Only trouble is that I don't have much spare cash because of the cost of living crisis, and the price of all my other risky investments continues to tank 🙄

Sell the food.😎

Buy silver and platinum (offshore VAT free)

I hope you weren't / aren't into Crypto!

 

[Stuntman]

Never bought or sold Crypto.  Not yet, anyway.  

I'm having a serious think about buying more silver and more platinum.  Depends on my time horizon, given that this will be to sell, rather than to collect.

[SidS]

Crypto is a Ponzi scheme. Lots of profits to be made if you get in early (i.e. when Bitcoin was <$20 per coin) and cash out near a high - gambling on the stock market if you will, but useless as a store of value.

[LawrenceChard]

16 hours ago, SidS said:

Crypto is a Ponzi scheme. Lots of profits to be made if you get in early (i.e. when Bitcoin was <$20 per coin) and cash out near a high - gambling on the stock market if you will, but useless as a store of value.

I agree.

This blog was written based on my notes and thoughts:

https://www.chards.co.uk/blog/is-bitcoin-a-speculative-bubble/966

Although it focuses on BitCoin, it also applies to other crytpo currencies, including the so-called StableCoins, which are only stable until the horse bolts!

😎

 

[Slam]

On 02/07/2022 at 08:34, Dom said:

That makes perfect sense bud, never actually thought of it like that, I think you've answered my question. We are being robbed lol. 

Even though there is VAT on silver would you and anyone else reading this not agree that silver is still a better purchase than gold in terms of bang for your buck? Just talking in a pure value for your money sense ie you get more value by purchasing silver inc the VAT than you do by buying gold exc VAT?

I believe only the individual can determine the value so if you are looking for an answer of what is best value only you can decide that, everyones circumstances are different. For example using my example in my previous post, for me out of silver, gold and food (loaf of bread, milk and ham), food for me is most and best value as its the cheapest but also is needed to survive. With gold and silver its not so needed as they are just metals at the end of the day. 

In terms of talking about value for fiat then using the pie logic then i would argue gold you getting more value because less 3rd parties and % are taking the piece of the pie. 

With all that being said and done, don't listen to me or anyone else, determine your value, determine your price, pay the price you like and enjoy your purchases just like any commodity in life.  

Best wishes