# Silver vs. Gold



## MARKETWAVES (23 May 2005)

Silver vs Gold

Silver bugs believe that, like gold, silver is money. They also 
believe that the silver price is going to vastly outperform the gold 
price because of silver's supply shortage. But silver is not money; 
it's a commodity whose price is far more dependent on industrial 
demand than on anything else. However, because the silver market is 
so small, it is entirely possible for silver investors to create 
their own self-fulfilling prophecy. You need to be nimble, and 
remember to sell, to take advantage of such an increase in the silver 
price.

Annual mine production of gold is about 80 million ounces while 
annual mine production of silver is roughly 600 million ounces, yet 
gold mining revenues are eight times more than revenues from silver 
mining at current metal prices.

Why is gold expensive and silver less so? Because gold is money and 
silver is primarily an industrial commodity. Even though silver has, 
from time to time, been used as money, its chemical and physical 
properties make it less desirable than gold as a monetary asset. 
Among other things, silver oxidizes readily, and it is far more 
abundant than gold.

Annual fabrication demand for silver is well in excess of eight 
hundred million ounces a year, of which roughly forty percent is used 
for industrial applications, just over twenty percent for 
photography, thirty percent for jewelry, and the rest (less than five 
percent) for coins and medals.

Because annual fabrication demand exceeds annual mine supply, silver 
investors believe much higher prices are in store. However, since 
industrial applications and photography account for roughly two 
thirds of annual silver consumption, fabrication demand plays a key 
role in the silver market. The silver price is thus very dependent on 
changes in annual fabrication demand. As a result, continued economic 
growth in North America and the rest of the world should help the 
silver price remain strong and perhaps move up, whereas an economic 
downturn could be quite detrimental to the silver price.

If we look at gold and silver in US dollars, then the relative 
strength in the dollar since the early Nineties should have had the 
same effect on both metals if they were priced as money, and their 
charts should look the same. But they don't. 

Silver actually performed much better than gold during the Nineties 
because demand for silver supported its price during the high-tech 
boom in the latter part of the decade. When the tech boom went bust, 
silver suffered, and its price barely budged from 2001 to 2003 while 
the gold price rallied strongly. Since 2003, gold and silver prices 
have moved more or less in tandem, and that is a result of the 
weakening US dollar. However, if we see a change in the economic 
climate, the correlation between the two metals' prices can easily 
break down again. 

The amount of silver typically used in any given application usually 
represents a very small component of the overall manufacturing cost. 
Therefore the demand for silver from both industrial applications and 
photography is very inelastic, meaning that if silver's price 
increases, demand does not decrease.

At the same time, because the silver market is such a small market in 
dollar terms, a relatively small amount of investment demand can 
cause the price to spike dramatically. And because fabrication demand 
is inelastic, fabrication demand will not decline due to the price 
increase.

So speculators buying silver in anticipation of a move upwards can 
easily create a self-fulfilling prophecy, causing the silver price to 
soar. But when they want to sell their metal to take profits, the 
same lack of liquidity that drove the price up will drive it right 
back down again.

This combination of a small illiquid market, inelastic demand and 
feverishly bullish investors could cause the silver price to 
outperform the gold price at some point. However, you must be wary of 
an ensuing collapse and remember to sell. Silver's day in the sun 
might be very short-lived.

Still, there is no guarantee that the silver market will enjoy the 
benefit of such a self-fulfilling prophecy. Judging by the silver 
price since 1990 in relation to what we know was going on in the 
world, it is entirely possible that silver will suffer along with 
other base metals and commodities during an economic downturn.


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## Knobby22 (23 May 2005)

*Re: Silver vs Gold*

I will conceed that silver would suffer in an industrial collapse however I think that the gold is money argument is a furphy.

Gold is also under the same supply demamd pressures and is mainly used in the computer and jewellery industries. These are less volatile but will have an effect should consumer demand drop due to a recession. 

Obviously the story would be different for gold should there be a breakdown of finacial markets where people lost faith in cash however I cannot see this occurring short of a nucleur war.


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## wayneL (23 May 2005)

*Re: Silver vs Gold*



			
				Knobby22 said:
			
		

> Obviously the story would be different for gold should there be a breakdown of finacial markets where people lost faith in cash however I cannot see this occurring short of a nucleur war.




How about when derivitaves house of cards blows over.


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## Knobby22 (23 May 2005)

*Re: Silver vs Gold*

A possibility.


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## bvbfan (23 May 2005)

*Re: Silver vs Gold*



			
				Knobby22 said:
			
		

> I will conceed that silver would suffer in an industrial collapse however I think that the gold is money argument is a furphy.




How do you know?
Have you been around the traps and know that everyone considers it the same way you do?

In India the women still 'save' in gold jewellry, if times became tough they usually sell the jewellry to pay for things

There has been talk of an Islamic Gold Dinar which would have actual gold backing, it has been talked of for several years but it is still a remote possibility


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## DTM (23 May 2005)

*Re: Silver vs Gold*



			
				wayneL said:
			
		

> How about when derivitaves house of cards blows over.




Please explain???     

Thanks in advance.


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## bvbfan (24 May 2005)

*Re: Silver vs Gold*

Some of the big firms in the US have derivatives exposure around 600 times their equity
LTCM (Long Term Capital Management) failed with around 30 times exposure

I think Adam Hamilton from Zeallc.com has some articles on his site, just look for derivatives or JPM


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## salz (29 May 2005)

*Re: Silver vs Gold*

In times of economic crisis, gold might not actually drop in value, it might rise... In many asian countries and maybe others, gold is an investment, like the '97 asian financial crisis, where thai baht, malaysian ringgit face speculative attacks, people there actually sell their currencies as they are falling in value and buy other currencies or they buy gold.
This effect is also seen during the 1st gulf War


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## twojacks28 (20 April 2006)

*Re: Silver vs Gold*

if you keep up to date with gold and silver articles it seems to me that the general idea is that the higher the price of gold goes the higher silver will start to go as it is an alternative for those who want a nice metal but who don't want to spend too much.


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## Smurf1976 (20 April 2006)

*Re: Silver vs Gold*

Both of them have undeniably outperformed cash, bonds, real estate and stocks during the past few months. Can't say much more really.


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## noirua (9 February 2021)

Silver is still leading over gold and it looks as if silver will break $30 before gold gets above $2,000.


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## rederob (10 February 2021)

Below charts the 50 years since gold was decoupled by Nixon from the US dollar, and indexes the movement against silver prices:



Next chart shows the outcome based on post-1971 strongest price correlation, placing silver ahead of gold:



And if you swapped to gold after silver's bubble burst in 2011:


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## noirua (20 February 2021)

Silver Live Chart: https://www.kitco.com/images/live/silverw.gif
v
Gold Live Chart: https://www.kitco.com/images/live/goldw.gif


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## Dark1975 (20 February 2021)

rederob said:


> Below charts the 50 years since gold was decoupled by Nixon from the US dollar, and indexes the movement against silver prices:
> View attachment 119814
> 
> 
> ...



I think if we look to the next 10 years with the high demand for silver in solar panels and tech, and the massive demand for EV (electric vechiles). I personally think silver will have alot of growth in the coming years , 
Pls Dyor , 
P.s : good work on the chart comparisons,


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## rederob (19 April 2021)

Can we use silver as a lead indicator for gold's rise?


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## rederob (19 April 2021)

What does silver reveal about gold?
The shorter-term perspective is also not enlightening:


	

		
			
		

		
	
[https://www.tradingview.com/x/ADWupN7I/


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## mullokintyre (1 September 2021)

This Video is suggesting that the Silver/Gold  ratio has become disengaged.
The guy is still a silver bug, but points out that any rise in silver will be disconnected from gold  price changes.
From Kitco News
He is suggesting that silver has become an industrial metal, as distinct from a value store.
He provides some interesting data  points.
Will need to watch silver a little more closely.
Mick


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## divs4ever (1 September 2021)

silver has become a more industry demanded metal as the world moved away  from lead-based solder ( and tooth fillings )  to prefer silver-based ones  , however , silver is mainly a by-product  of successful miners  of gold and copper  (  very hard to find profitable miners that earn the bulk of their income from silver production  , S32 seems to come closest in my portfolio  )

 so silver producers as an investment is HARD ( maybe SVL will reverse that in time ) .. i do not hold SVL

 owning physical silver is easier 

 so gold producers , and some physical silver  works best for me 

 the one to watch will be copper/nickel as the world  tries to steer away from physical currency ( into strictly digital )

 there are huge numbers of coins world-wide , liable to become obsolete  ( except for collectors )


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## mullokintyre (1 September 2021)

Silver is also in great demand in the Electronics industry.
Its a very good conductor, is not reactive, and has a relatively low melting point.
Silver is used extensively on the making of solar panels.
It is also used in the medical industry.
Silver  is a natural anti bacterial agent, its often used as a coating on medical instruments.
My dishwasher has a very fine coating of silver alloy on its surface to discourage bacteria.
There are a couple of Silver plays apart from SVL. ARD and KTA are two that spring to mind
Mick


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## mullokintyre (1 October 2021)

My three proxies for Silver, SVL, MKR and ARD are all up today, though the silver price is down, and has been for a while.
Are we being set up by those in the know??
Mick


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## divs4ever (1 October 2021)

my major silver plays  are S32 ( which is a diversified miner ) and SDI ( sells implants and accessories to dentists ) ( plus a few old coins )

 am more into gold ( and gold producers ) than silver , and the primary reason is the  silver miners  that look attractive ( to me )  are still brownfield or greenfield projects , and i am retired  so am adverse to be  holding  before they are in full production


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## mullokintyre (1 October 2021)

I like the three I mentioned because of their volatility.
Have played all three for some years as the price of silver moved up and down.
Mick


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## DaveTrade (1 October 2021)




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## qldfrog (1 October 2021)

DaveTrade said:


> View attachment 130932



I know, i am very heavy silver and it hurts..chart wise, i do not like what i see


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## DaveTrade (1 October 2021)

qldfrog said:


> I know, i am very heavy silver and it hurts..chart wise, i do not like what i see




Yes Silver has been falling since the end of May but on the bright side it is up 76.6% since the 20/3/20 Covid low and Gold is only up 17.2% from that point. So as with any investment it's all about when you buy and when you sell.


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## StockyGuy (1 October 2021)

yeah march 2020 was the time to buy almost EVERYTHING


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## DaveTrade (1 October 2021)




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## divs4ever (1 October 2021)

March 2020 was like being a kid in a candy store but only $10 in your hands ( not enough to buy the whole store )

 it was hard work just maintaining any sort of discipline


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## DaveTrade (1 October 2021)

divs4ever said:


> it was hard work just maintaining any sort of discipline




Yeah I was freaking out through that whole downturn, new to options and trading them on multiple country ETF's on the way down. I keep my head but when it got to the bottom I was spent and just took a rest. I couldn't get my head into the up move at first, I was just glad to be out.


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## qldfrog (2 October 2021)

Just looked at silver gold: US market strong up >1%,silver2.4% and gold just 0.2%
That should boost my portfolio


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