Investment Decision: Should You Opt for Gold or Silver?

In a recent discussion, a seasoned investor shared insights on the gold and silver market, addressing the question of whether to invest in these precious metals.

The speaker, who manages a substantial portfolio, stated that it is unlikely for gold to triple or quadruple from its current price of $2,500 per ounce unless there is a currency crisis or extreme inflation. However, he expressed optimism about silver's potential, suggesting it could possibly triple or quadruple from its current price of just below $30 per ounce.

The speaker did not express a firm opinion on the ideal silver-to-gold ratio, but he suggested a 75% gold and 25% silver allocation for a portfolio. Interestingly, his physical portfolio allocation is now approximately 90% gold and 10% silver, reflecting a shift that occurred in 2011.

The investor also raised concerns about the potential manipulation or suppression of the silver market. He noted that such practices are not unheard of, but did not elaborate further.

Historically, the silver-to-gold ratio has gradually been climbing for a generation now, averaging between 50 and 85. The current ratio, around 86 to 87, indicates that gold is relatively expensive compared to silver. However, the speaker emphasised that such a correction in gold would be temporary.

The speaker also highlighted the difference in nature between gold and silver. While gold does not get consumed, silver does. This consumption factor, coupled with its use in industrial applications, can influence the silver market's dynamics.

In 2020, the silver-to-gold ratio went as high as 125, a significant deviation from the long-term average. The speaker, however, stated that the silver-to-gold ratio "should" be 15, but it is unlikely to go to 15 in his lifetime for an extended period.

The investor also shared his experience with silver over 20 years, suggesting that it has a tendency to disappoint. Despite this, he acknowledged silver's potential and encouraged a clear purpose for buying precious metals, either for speculation or to protect the value of what has been earned.

It's worth noting that silver no longer serves as a medium of exchange, with money now digital. However, the speaker emphasised that the purpose of buying precious metals should be clear, either for speculation or to protect the value of what has been earned.

In conclusion, the speaker's perspective offers valuable insights into the gold and silver market. While he sees potential in both metals, he advises a cautious approach, particularly with silver, due to its speculative nature and potential for volatility.