Gold Or Silver - Which is the Best Investment?

It is fall 2008; our economy is shrinking; ourtends to skew the ratio of gold available to
personal and business assets are loosing marketconsumers and investors as compared to the
value across the board; the banking system issilver available. And it is a valid factor in arriving at
going catatonic; and commodities like gold anda proper price for gold with respect to silver,
silver are bouncing around like my truck on a roadprovided that this hoarded gold remains unavailable
full of potholes. Earlier in the year the US dollarfor investment or payment in trade. If this
was declining in value against virtually every otherhoarded gold came back into the markets as a
currency and all commodities. While this fall themonetary unit it would un-skew a gold-silver
dollar has strengthened relative to foreignrelationship that goes back to the late 1800's.
currencies because the problems in our economyHowever, if governments decide by law to
are also global problems that are affecting theremove even more gold from private ownership
economies of all industrialized countries. Along withto government ownership, they will do so at their
the worldwide banking collapse and strangulationprice, similar to the US government action in 1934;
of our economies by high energy prices, we areand whatever is left in private hands will be too
entering into a significant global recession. Pricesmall of a quantity to serve as money. In either
speculators have been very active all year long incase silver would increase in value as compared
all of the commodity markets, such that prices onto gold.
all raw materials, including gold and silver, shot upI am not asserting that gold and silver are
dramatically in the first six months of 2008, whileimproperly valued today. But I am asserting that
in the past few months speculation is now drivinginvestors who own gold to protect themselves
most commodity prices way down. Since gold andfrom the calamity of a failed economy and
silver have been de-monetized for a long timeinflating paper currency are investing in the wrong
their values only rise and fall with industrialmetal, by a factor of at least eight. Our current
demand, because social demand for them asindustrial and jewelry use of these metals would
safe-haven money is still very limited. If ourhave no relationship to the value they would
economy goes into a deep recession, thebecome as barter-money in a failing US economy.
uncertainty of job security, retirement security,So one cannot compare these metals today and
and the near certainty of rising inflation, caused bymake an investment in holding either of them,
government deficits and Federal Reservebased on their current uses and values in our
intervention into shoring up failing banks and othersocial economy. When gold and silver are
private businesses, will cause more people, as wellre-monetized to act as money in our economies it
as many businesses, to exchange dollars for goldwill not be by government decree, but by the
and silver. Right now there is a preference foractions of citizens acting to create opportunity
gold rather than silver as a security hedge; butand build a new economy.
for the individual, gold is the wrong metal to own.If a well-to-do person were going to set aside
Consider that with more than six billion people onfood and other necessities for future consumption
earth there simply is not enough gold and silverin case of economic depression, should they be
available to have these precious metals fulfill theadvised to purchase champagne, caviar, and
role of money for everyone. It is estimated thatfrozen pastries (gold); or should they perhaps
about 4.4 billion ounces of gold have been mined inpurchase apple juice, sardines, and crackers
historical times and at least 4 billion ounces are still(silver)? Quantity is more important than show
with us as pure bullion, or easily recovered andwhen one is trying to survive. People who invest
smelted into pure bullion; this amounts to onlyin gold as insurance against economic depression
two-thirds ounce per person. It is also estimatedare not acting in their own best interest; they are
that about 44 billion ounces of silver have beensimply following their investment counselor's bad
mined in historical times and about 20 billion ouncesadvice.
of this silver has been consumed in the past andIf investors and their counselors really understood
disposed in ways that are not profitable togold and silver they would never purchase or
recover. Approximately 24 billion ounces of silverrecommend the purchase of gold at its current
could be recovered and converted to coins orinflated price. If silver is mined at ten ounces for
bullion; this amounts to about four ounces pereach ounce of gold and is priced correctly at
person. Central banks and governments hold$10.00 per ounce then gold should only be $100.00
about 800 million ounces of gold and negligibleper ounce, when we consider their monetary
amounts of silver, leaving just over 3 billionbarter value. But if gold is priced correctly at
ounces of gold and 24 billion ounces of silver in$750.00 per ounce then silver should be $75.00
the hands if businesses and individuals; or anper ounce. Whichever way the market moves in
approximate ratio of 8 to 1.a panic, silver will appreciate by a larger factor in
If our paper currency fails, causing people torelationship to gold. Actually, both metals would
barter with gold and silver for their daily needsappreciate with respect to the US dollar, but silver
and wages, then gold can at most command awould outpace gold in percentage growth at the
value of eight times that of silver. Since thepoint where producers and consumers started
current ratio of value is $750 to $10, or 75 to 1(inpreferring gold and silver in exchange for goods
the fall of 2008), gold is nearly 10 times higherand services. Giving investment in silver today
that it should be relative to silver. This means thatconsiderable value over investment in gold,
silver will appreciate many times over when goldbecause of this growth potential.
and silver become barter money again. It is lessBesides the ratio of gold to silver issue there is
than 50 years since silver was taken out of ouranother important aspect of gold usage in tough
US coinage; yet prior to 1964 silver has been ineconomic times that must be considered; and
coins going back over 1000 years. While gold hasthat is the usage of gold to purchase food,
not been barter money since 1934 in the Unitedtoiletries, medicines, clothes; etc. If we were to
States, its history as coined money goes backdo the Zimbabwe thing and have the US dollar
more that 2000 years.inflating 100 % per week while very few goods
It makes no sense to ask whether gold will go toare available to purchase; anyone going to a store
$10,000 per ounce or $10 per ounce, because it iswith a shiny 1-oz gold coin would find that their
the US dollar that is changing value. Gold and silverpurchases may only use up 10 to 20 percent of
change their value very little with respect tothe value of their gold coin and that the store
goods and services for which they may becashier would not give them change in gold or
bartered. One hundred and two hundred yearssilver (even if the store had gold and silver to
ago an ounce of gold would buy a good suit ofmake change); the cashier would give them
clothes and an ounce of silver would buy a goodchange in paper dollars that would rapidly inflate to
meal at a restaurant, and so they will today. Overnothing if they could not be quickly spent.
the years these metals have not strayed veryThis problem would not occur with silver to any
far from this valuation except under severegreat extent because silver is still available from
economic tensions, at which time they typically100 oz bars down to 1 oz coins, and also available
rise in value rapidly.as old US coins, right down to silver dimes,
Even though gold and silver are in relative shortpermitting shoppers to pay with exact change for
supply and little used as money, the U.S. paperthe goods they require. In the late 1970's an
dollar is the wrong barometer of economicelderly Dutch gentleman told me how he
stability. Assets and commodities should not beexperienced this very problem when he was sent
valued in terms of US dollars, but in terms ofto Germany in the early 1920's to go to
fixed quantity commodities like gold and silver.university. The gold coins he received from home,
The unstable item (dollar) fluctuates in terms offor living expenses, was greatly sought by the
the stable (gold), not vice versa. Reporting itshopkeepers, but they had little to sell and he
backwards does not make it valid. Worldwidealways received change in German Marks (paper)
currencies should be exchanged by valuing themthat lost more than half their value in a week. He
to gold and silver, not to the U.S. dollar, or anyseldom got full value for his money, because of
other currency for that matter.daily inflation. The same situation could occur here;
In the past there have been many governmentit certainly has hit many nations in the last few
attempts to peg a monetary ratio between golddecades, and for some it lasted many years.
and silver. It has been ten-to-one, twenty-to-oneSilver is by far a superior investment to gold
and even thirty-four-to-one during the depression.when it is being held as insurance against
Teddy Roosevelt ran for President promising toinflationary times and economic panics.
fix the ratio at sixteen ounces of silver to oneThe companies that mine gold and silver for our
ounce of gold. These ratios not only show aindustrial and personal consumption should be
historical variance, they also are all showing ratiosaware of the potential re-monitization of these
of silver to gold that are greater than the realmetals by consumers and retailers; and what this
amounts of these metals mined and refined. Thecould mean for their businesses in tough economic
reason that these metals are not valued in directtimes. Recovery from a bout of depression
relationship with the amounts mined is principallycaused by hyperinflation will depend a great deal
the hoarding of gold by governments, centralon having a good supply of gold and silver and a
banks, international banks, and some internationalvibrant mining industry to supply the money
corporations. This hoarding of gold is the same asnecessary to grow and expand a new economy
it having never been mined, as far as theand support international trade.
markets are concerned. This hoarding of goldCraig D.