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If there has been one main thing that I have been
pushing on this blog, it has been get out of ALL paper assets and into real
assets. You
may have not felt it over the past month, but the markets are listening.
I wrote on July 24th in Another Silver Drive By Shooting Coming? that we were at a key moment where the
dollar was poised to break down and that Gold and Silver were about to
explode. This idea added to the debt ceiling talks and the opening of the
Hong Kong Mercantile Exchange and that gave me the feeling something BIG was
going to happen. I thought with the mass shooting in Norway we were going to
get another silver drive by shooting
like we saw after the OBL buried at sea lie. What that feeling turned out to be was a massive shift out of paper
assets into real assets.
Gold has been on fire versus the S&P 500, the
Dow and the 10-Year Treasury.
This action says to me that very big money like China, South Korea, Mexico,
Hugo Chavez and massive funds are moving huge money into real assets and out
of paper assets. I believe that this “smart” money finally sees
the futility of owning paper assets with a US and European governments
content on being the spender of last resort and a Fed and ECB willing to be
the lender of last resort. Couple this with an ever slowing economy, a double
dip in the housing market and the inevitability of QE3, owning paper assets is suicide.
I wrote in my article 10Reasons Why
Gold is the Gut Reaction… that when people first buy real assets, they tend to go to gold first. I believe all of these big guys piled into gold, but this will spread
throughout all commodities soon. This action is also very significant because
the 4 markets mentioned above are huge in terms of the amount of money it
would take to move the markets as much as we have seen in the past month.
If you missed that huge move between
gold and the major paper market, don’t worry. The major rush of humanity out of a mathematically inevitable
collapse of the dollar, the world’s currencies and markets will send
all real assets to the unprecedented heights. I believe that silver is going
to do phenomenally well relative to not only all paper assets but even
against gold. I think there is a strong case that can be made that we will go
below the 1:16 or 1:10 ratio, possibly all the way down to a
1:1 gold to silver ratio.
(Please
note that I do not play with the fun game of guessing the dollar price of
gold or silver. While it is fun to throw out numbers like
$10,000 gold or $1,000 silver, the reality is that I do not care what the
dollar price of silver is, ever.
I am investing in silver because the dollar is going to become useless as a
Confederate Note. I would not
consider selling one ounce before the collapse of the dollar. Whatever
the new monetary paradigm is created out of the ashes of the dollar, whether
it is a new dollar or a gold or silver currency, there will be tremendous
opportunities to by thoroughly inexpensive income producing assets for
nothing. I will hold until that day. Read: Who Cares
About Your Bet, If The Casino Is Being Demolished?!)
If you cannot or should not use the dollar as your
measuring stick for your assets, then the best way for determining relative
value is ratio investing. If you look throughout history there is the 1:1 Dow
to Gold ratio during the 1980 peak of gold. The one that I like the most for
silver is the 1/1oth of an ounce of silver for a day’s wage for hard
human labor. (Read: Honest Work
For Honest Silver Pay or Retire
Off Of $30,000) The gold to silver ratio is probably
the best known ratio and it currently is at 1:43. I know that by any logical
sense that silver is extremely undervalued relative to gold, besides any
other factors that are extremely bullish on silver. (Read: The Ultimate Silver Investor.)
 
1. The historical monetary ratio of gold to silver
is 1:16 to 1:12, which means that silver should rise
200%+ faster than gold.
2. The natural mining ratio coming out of the Earth
of gold to silver is 1:10, which means that silver should rise 350% faster
than gold.
3. The ratio of gold to silver at the CRIMEX is 1:9. There is 11,575,304 ounces in total registered
and eligible Gold holdings and 105,694,470 ounces in total registered and
eligible silver holdings. (In late 2008 there was
approximately 3,000,000 ounces of Registered gold at the CRIMEX and
85,000,000 ounces of registered silver, that was a 1:28 GSR back then.)
4. If we understand that all of the gold ever mined
has been treasured by humanity as a truly precious metal, while silver has
been used and abused as an industrial metal, this Gold to Silver ratio must
be lower than either of the above ratios. Most
silver is used in such small quantities that it is uneconomical to try to
recycle a few grams out of an old cell phone.
5. All of the major stockpiles of silver that all of
humanity ever mined are gone.
The US government had 5 billion ounces of silver in 1950. Only 29 million
ounces in the Registered vaults of the CRIMEX.
6. Silver is second only to oil for the amount of
uses of any commodity. It is the
indispensable metal with so many vital uses. As we move from a carbon economy
into a new technological economy, silver may become more vital than oil to
the next paradigm with its uses in solar, tech and medical industries. These
industries are incredibly profitable industries and they use such small
quantities of metal that the price is unimportant. This demand for industrial
use makes silver more important than gold.
7. Silver has started to catch investment demand,
but so far most of the money has gone into paper derivatives of silver like
SLV, futures or mining stocks. At
some point investors are not going to settle for anything less than the real
physical metal. This should have a dramatic effect on the price of silver due
to all of the blatant price manipulation pointed out by Andrew MacGuire. He and others have claimed that there are as
much as 100 to 1 paper ounces of gold and silver traded for every physical
ounce of gold and silver available. The day they can’t deliver there
will be a mad rush to claim the real metal from industrial users and
investors alike.
8. Silver has naturally been used as money more
times and more often than gold. In
a world about to lose faith in all paper currencies, silver will once again
find a unlimited demand to be used as money once
again. This demand on top of the investment and industrial demands will be a
powerful force on the metal that gold simply does not have. (Read: The 3 Demands of Silver.)
9. There is already a 1:1 ratio of dollars invested in
gold and silver in Sprott Asset Management
, GoldMoney and the US Mint. The 1:43 ratio we
currently have cannot sustain that much of a dollar demand difference, without
coming closer to 1:1.
10. The 1:1 Gold to Silver Ratio has happened
before.
“For the first time in history, silver coin,
of the leading nations of Europe sold at a higher price than gold coin. This
of course does not mean that silver is more valuable than gold, merely a
silver dollar or shilling is worth more than a gold dollar or
shilling.”
Silver the
World Sensation in 1919-1920
January 24th, 1920
“Are the New York financiers living up to
their claims of honesty that they made
so vociferously in 1896, or are they paying their debts in a cheap gold
dollar?’.’ asked Mr. Bryan
the other day when the bullion value of a silver dollar had soared beyond the
bullion value of
a gold dollar.”
The
commoner. (Lincoln, Neb.) December 01, 1919
“With the bullion in a silver dollar worth
five cents more than bullion in a gold dollar the cross of gold does not look
so yellow and the crown not so thorny as it was”
Source
Silver coinage throughout the world is worth more at
bullion value than the par value of gold coin. For instance, 5,900 British
shilling coins contain just 1,000 Troy ounces pure silver, but are worth
6,929 shillings at the market price of 77 pence for British silver bullion.
Over 1,000
shillings is the premium on the market value of 1,000 ounces of pure silver
over the coin value in British coinage. The 5,900 shilling coins were worth
346 in the silver bullion market, and only 295 at par or gold value of 295 in
gold sovereigns or in gold bullion;…
Mohave County miner and our mineral wealth. (Kingman, Ariz.) January 24,
1920, Source
William Jennings Bryan:
“I’m too much perplexed by
the news of the day. The morning papers announce that the bullion In a silver
dollar Is now worth five cents more than the bullion in a gold dollar. The
shock upsets me. I am not able to speak with composure. My thoughts insist on
running
back to 1896, when the self appointed champions of
an honest dollar vociferously declared that their consciences would not allow
them to pay their debts In any but the best money. I am patiently waiting for
tho afternoon papers to learn whether these men are
paying their debts today In silver dollars at a premium or whether they are
using the cheap gold dollar for liquidation purposes. If I find that they are
using gold coin, now five cents below tho silver
equivalent, I shall suggest the appointment of a congressional committee on
conscience
to ascertain why these men who used to profess so highest standard of
patriotism and honor, have fallen from grace….”
Source
The commoner. (Lincoln, Neb.)December 01, 1919,
“For a silver mine
today is more valuable than a gold mine” (Source.)
The State of the Union by Archer Wall Douglas
The Independent April/May/June 1920
(Special thanks to row5_seat47 on Kitco
for the info.)
11. Finally, the USGS said that silver has the very real
possibility of becoming the first element on the periodic table to become
extinct by 2020. That is in 9 years! That is less than
9/11 ago. This means that unless there is a massive revaluation of silver and
we keep consuming silver at this pace, there will not be any silver left.
This alone should make silver rise to unprecedented heights. (Read:The
Ultimate Silver Investor
for more info on silver.)
Keep
Stacking!
www.24hGold.com
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