Understanding the Gold-Silver ratio and how to exchange it

Swap Gold / Silver Ratio – Want 15-35% Return Without Cash

Many of the upward trends in the metals ward are owned by both. However, there is more you can do than buy and hold gold and silver. You can periodically “exchange” or trade for one for the other. To do this successfully, you must first understand the gold / silver ratio.

The gold / silver ratio tells you the number of ounces of silver you need to buy one ounce of gold at a given time. If you look at the price of gold and silver going back 4,000 years:

  • Ratio historical ratio is 16: 1 (it took 16 ounces of silver to buy 1 ounce of gold)

  • Over the last 100 years, the ratio has been 30: 1

  • In the last 12 years, the ratio has come close to 60: 1

  • In the last 5 years, the ratio has changed from low 40 to around 100

  • As of March 1, 2011, the gold / silver ratio was below 40: 1

How do we take advantage of this ups and downs?

  • First – We take the time of our purchase on the basis of ratio. If the time ratio is relatively high, we are in favor of silver in case of new purchase. We are in favor of gold when the ratio is relatively low.
  • The end – We work when the ratio reaches the top and bottom. When the ratio is high, we exchange gold for silver. Then when the ratio decreases, we bring the silver back to gold. In other words, when silver is appreciated faster than gold, we exchange silver for gold. Then, when silver becomes “cheaper” than gold, we convert gold into silver. Every time we go through this cycle – from gold to silver and back to gold – we increase our ounces. That is the whole purpose. For example:

    • Suppose you had one ounce of gold and the gold / silver ratio stood at 80: 1. You can convert your one ounce of gold to 80 ounces of silver.

    • When the ratio is reduced to 40: 1, you will exchange your 80 ounces of silver for 2 ounces of gold and double the ounce you hold.

  • Next – We bought the silver or gold form which provides more profit potential. During periods of high demand, investors often bid the premium on certain items of 20 to 40% or more of its underlying value. At this point, we can exchange high premium items for others with lower premiums – capturing many differences, and converting those differences into metallic extra ounces.

Also, no additional financial expense is required to use this strategy. Adopting this ratio strategy beats the option – sitting waiting for the price to rise

Caution

  • Taxes – If you realize any profit from the transaction, your tax may be levied on the profit. We do not recommend taxes. Consult your tax expert.
  • The market is risky – I do not set price points independently. Rather, I lean too heavily on others in the industry who have been practicing the technique for decades. The market may not cooperate. The challenge is to accurately identify the exchange points based on the relative evaluation between the metals. The ratio can be much higher or lower than our target. Then we will have to wait longer to correct the ratio again. This is an essential risk in proportional trading.
  • Expenses – As shipping costs are incurred for transactions, bid-asset prices spread and commissions can reach more than 8% even though they should be lower. We need to retain enough trade to recover the cost of the transaction. Trading related to the physical metal business is more expensive than trading in ETFs, futures or other paper instruments. To keep your costs down, We charge one-half of our general commission for exchange transactions. Many more will take full commission in both the buying and selling cases. Be careful.

Benefits

  • More ounces at no cost – The Gold / Silver Ratio trading strategy takes an investment that would otherwise stagnate and increase the number of ounces you hold – without any additional cash outlay. From now on and towards the end of the bull market you should expect to conservatively double your ounces using this strategy.

What you need to know

  • When I first started buying metal about 20 years ago, my mentor often reminded me that he was not a prophet. In the same vein, if I am wrong about the gold / silver ratio, it will cost you money. You will buy silver instead of gold and gold will surpass silver or vice versa. I don’t think that will happen. Or, if it is, it will be temporary. I have successfully deployed this strategy many times. Sometimes the deadline between swaps is relatively short – maybe just a few months. Other times it took two years or more.

  • I suggest exchanging silver for gold when the gold / silver ratio drops to 48 or less. Consider further switching as the ratio decreases further. We will then look for the opportunity to convert that gold into silver again and that amount of silver will earn extra ounces.

  • You will not be able to understand the exact same ratio of spot ratio as there are commission and other transaction costs.

  • You are ready to exchange (150) ounces of silver or more as long as the swap strategy works for small and large investors. We will convert the lowest cost, most readily available, most liquid gold coins – the one that offers you the most gold for your silver.

  • This is not a prayer, just a strategy. Please do your best and make your own investment decision.

  • I am still ultimately in favor of silver over gold because I am sure that the ratio at the top of this bull market will reach 16: 1 (or less).

Household

  • It is impossible to exchange the exact amount of one metal for the right amount of another metal. For example, one ounce of gold can buy 50.17 ounces of silver, but exactly 50 ounces is never even available. I try my best to get as close to the same-up as possible. The rest we will endure in cash. You may have a small amount, or you may have a small amount. I try to keep these amounts below 100 100.

The opportunity to exchange gold / silver sometimes presents itself. If you’re interested in learning more about how you can increase your metal holdings by 15% to 35% or more without spending cash, contact us. The window of opportunity is very narrow.