Porter Stansberry, author of ‘The End of America’, has written about how silver’s price used to track the price of gold when it was also used in currency. The ratio used to be around 16:1. However it is now more like 54:1. He has charted how the ratio tends to revert to its old levels in times of crisis. This means that when there is a crash or bad correction to the markets, silver is an excellent hedge, because its price will rise by many times more than the increase in gold.
Stansberry proposes that when gold reaches $2000/oz., which may not be too far off, he is looking for a silver price of $125/oz, more than 4 times its current level.
Whether or not you believe his forecast, it is definitely the case that silver’s prices are often decoupled from those of gold and they do not always follow the same path. Silver is more volatile, which has benefits and downsides, but it makes it a very useful counterweight to an investment in gold.
Silver is more volatile than gold, which has benefits and downsides
Viewed independently, silver is a useful entry-level form of bullion and many investors have cut their milk teeth on it, so to speak, before building the confidence to invest in other more precious metals. It is easy to buy a sleeve of coins and track their performance before selling at the right time. When considering how to buy silver it is important to remember that it is highly unlikely that any capital gains tax will be payable due to the high threshold relative to silver bullion’s value.
If buying silver bars, it is a good plan to buy the biggest size you can afford: these will have a lower spread between purchase and selling price. As with gold, bigger bars are easier to make therefore they are cheaper per unit weight: silver’s much lower value makes this a more important factor. 5kg bars present the best value but are relatively expensive: the 1kg size is a good compromise between cost and flexibility.
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