I’ve written about this dozens of times over the last 43 years, and now I’ll do it again, because people are always asking us what to buy. The lowest ratio I have seen, was 16 to 1 in 1980, which is what it has been throughout history, but in that case, I think it was because Bunker Hunt was trying to control the world’s silver supply, which was, and is, impossible. His efforts made him go bankrupt. His bankruptcy was helped by the futures market when they refused to buy from him when he tried to get out…as I remember…as it was a long time ago.
The ratio between gold and silver has been 16 to 1, or gold being priced at 16 times the price of silver throughout history. This goes down a thousand years or more, and if the ratio is different, a few points may make little difference, but today’s ratio of 87 to 1, is absurd. Is silver underpriced, or is gold overpriced? I have researched, and it costs a bit less than the current prices to produce both. Spot prices of metals are what is paid at the mine, basically. These costs couldn’t possibly cover the costs of mining, milling, smelting, manufacture and distribution, so current prices on our web site, are probably about right, considering that every entity in the chain must make a profit of some kind or not be in existence. Our 1% charge includes shipping, and when you sell, a small $25 charge, which is certainly not common in the industry. Why is the ratio so high? Could it be demand? There doesn’t seem to be a shortage of either at the mines. What then is the reason? I don’t know, but it seems to me that if you have a huge safe or plenty of storage space, silver is still the best buy, but it takes so much storage space, that I, for one, am buying gold. Will the ratio reduce in favor of silver in the future? I think so, but who knows when? This morning, platinum is down $19 and gold and silver are up. Why? I don’t know, so I may not be much help, other than to remind you how much space silver takes to store and to ship, if or when you want to sell.
Other than 1980, the lowest ratio I have been able to find, at least in the last 43 years, is 39 to 1. What is the answer then, as to what to invest in at today’s prices? Look at it this way: An ounce of gold’s price is 87 times the price of silver, and to put it another way, gold requires a 87th the space of silver to store, and if selling, to ship. Or, silver requires 87 times the space of gold to store and far more to ship if you sell. Me? I’ve got almost as much silver as I can store, because of its size, and therefore I am buying gold. A 500 ounce mint box of Silver Eagles, weighs about 35 pounds, and takes a lot of space in a safe. I always keep one, and a customer recently came by and wanted it. I sold it to him and replaced it. My silver supply then, remains as it was.
People seldom change their opinions, eating habits, religious affiliations, residential locations, brand of car, or much of anything as far as life style and habits are concerned. That’s why so few distrust dollars, but keep on saving in banks, and have CD’s and savings accounts. It should be so obvious that dollars always decline in value and purchasing power, and that it is foolish to store surplus assets in dollars, but most still do and always will. Un-backed paper currencies seem to have a mystic attraction to people everywhere on Earth. It is obvious that the majority will never change, and the majority will be wiped out, as they have already in Venezuela, Lebanon, and everywhere, including here in America. I’ll be 86 in a couple of weeks, and if I had stored my wealth in a bank 43 years ago when I started doing this, I would now be decapitalized. Until I started doing precious metals, I never even thought about storing wealth in gold and silver. It never occurred to me, just like it never occurs to 90% of the world’s population. I can’t change it, but I wish I could.
Is real estate a good thing to buy? If it is your home, I say yes, and if you are young and energetic, have enough capital so as not to have to borrow, and want to buy a wreck of a house in a good neighborhood, and in your area prices are going up, you have a good plumber, roofer, electrician, carpenter, and a lot of sleepless nights, maybe. I did it recently, made a few dollars, but I will never do it again. I spent too many nights thinking about what to do about this or that, and can I sell it for what I have in it, and on and on. As an example of real estate, I’m a life member of the Germantown Historical Society in Philadelphia, where I lived before moving permanently to Colorado in 1971. While I was in Philly, I built a chain of ten ice cream parlors, and my ten stores sold over 100,000 gallons of ice cream in 1970. I did so well that I bought a huge, 1888 home with (believe it or not) ten bedrooms, a 35 foot gorgeous library etc. As I remember, it had about 7,000 square feet. Ask David and Melissa. They were very young at the time, and when we went in it for the first time, they got lost in the house and cried, “Mommy, where are we?” It was a blast. As I remember, I paid $21,000 for it in 1968, and 3 years later sold it for a bit more when we moved to Colorado. It recently came up for sale, and sold for $710,000, but the third floor had been turned into two apartments, it was so large, new kitchen, bathrooms, etc. I’m sure that after all the improvements, no profit was made in 49 years. Still it’s a great house. E-mail me and I’ll send you a picture of it. I’m happy with my metals thank you! –
-Don Stott
don@coloradogold.com