gsr nearly 85

[Danny-boy]

But HT, it's not scientific facts that you are trying to change beliefs with, it is merely conjecture.

You said we are in unchartered territory, so how is your belief more valid than anybody else's in the absence of scientific fact.

Just a thought

[4Nines7Hills]

I like listening to everyone's views and theories...it allows me to make a more informed decision. I for one have changed My opinion a couple of times on various topics, as members have brought up a point of view I hadn't considered before.

[HighlandTiger]

But HT, it's not scientific facts that you are trying to change beliefs with, it is merely conjecture.

You said we are in unchartered territory, so how is your belief more valid than anybody else's in the absence of scientific fact.

Just a thought

I never said it was DB. ..... it appears you are infering something from my post that was never intended.

I was trying to make the point, (unsuccessfully it appears in your case), that we can go around in circles with this thought and that thought, but in the great scheme of things people (and especially the types of people who are predisposed to a PM stacking forum ) have fixed entrenched ideas which are rarely swayed by what others on here say.

Something we found to be true from previous past histories with a certain person currently residing in the Iberian peninsula

[Vulture]

My own take on the gsr is this. Its not real by virtue of the fact that the charts are not real. Given that both gold and silver prices are manipulated by the underlings for the psychopaths then strictly we do not know the actual gsr.

 

On the basis that we have to start somewhere in the rigged casino gsr I think that there have been some good points made on the negative aspects for silver BUT I still think it has its part to play should the system hit a wall. At that point, if the general population suddenly decide gold and silver have a monetary safety value then as we know silver rather than gold is much more affordable.

[JB3]

7 minutes ago, Vulture said:

 

My own take on the gsr is this. Its not real by virtue of the fact that the charts are not real. Given that both gold and silver prices are manipulated by the underlings for the psychopaths then strictly we do not know the actual gsr.

 

Really?

 

Even if you believe the prices of gold and silver are manipulated by some secret society, you can easily establish the 'real' GSR. Just go to any bullion or coin shop or a pawnbrokers and see what the price of a real ounce of gold is and divide it by the price of a real ounce of silver.

 

Unless you think the pawnbroker is in on the fix as well.

[Vulture]

JB3 -

Glad to know there is no manipulation of the metals and how I can find out the gsr.

I shall sleep soundly now

 

Ooooooo   ‘Secret society’   - Have you been listening to Fox news again

https://www.youtube.com/watch?v=QO6QwySsm-M&app=desktop

[JB3]

You mentioned, "underlings for the psychopaths". I'm not the one seeing monsters under the bed.

 

My point is, it matters not whether there is price manipulation or not: you can establish the GSR by going into a coin shop and comparing the price of physical gold to physical silver.

 

When you walk out of the shop with the metal in your hand, the price you paid *is* the price, whatever any Illuminati you fear might have done. That is true price discovery.

[KDave]

There are those that subscribe to the theory that the GSR in its current state is another indicator we have seen the bottom in both gold and silver. I am not so confident. Although I know that it never really is different this time, the economic environment certainly looks different from anything else I have seen in history. Gold to oil ratio appears to be broken, why should the GSR not be too? Gold to Platinum? Even if you take historical references at face value, everything points to gold being expensive not the other way around.

Only with hindsight will we know if the current GSR did indicate the bottom in gold and silver. There is a positive in this, as if it does still associate with the bottom in precious metals, then you can rely on it indicating the top, when it reverts to extremes in the other direction.

[Rpasterf]

I read this and on one side want to trade all my silver for gold. On the other I want to buy as much silver as I can.

[Pipers]

I just wanted to add the following, there are 4 gsr's 

1 lbma with fees for delivery 

2 paper, comex etc

3 Vaulted, Goldmoney etc ,(some on the forum hold)

4 bullion in hand, small coins bars etc  This is what most hold.

IMO if you want to play the ratio game you should open a Vaulted account like Goldmoney or bullion vault. 

 

[ikeonet1]

I've refactored a portion of my stack because of the GSR ratio. Why? Because it seems practical and a good marker to initiate a change on a portion of my holdings. I converted a 36 oz and 1 gram gold panda of premium silver pandas for 2 kilo lunar coins. Just because one subscribes to GSR doesn't mean you have to stick to the book definition. I've also adjusted my buying patterns to buy more silver weight than gold, but that doesn't mean you have to stop buying gold. GSR just infers that gold might be overvalued at the moment. Whether gold goes down or silver comes up is irrelevant since the correlation is just a metric to potentially make decisions on.

If you don't subscribe, no problem keep buying gold. In the US. we don't have the VAT, so for EURO folks it makes little sense for you guys to buy silver anyways. Also, if you don't use GSR as a tool, what are you buying? Are you still buying in the same qty or $ amount? If not, why? 

There is still the very real possibility of going to 100:1, but if you are diversified enough you can make money both sides if both metals go up. If they both go down, it doesn't really matter because you lose anyways. If you think gold will continue to rise, then keep buying it. I subscribe partially to the theory that GSR as a tool can be leveraged if leveraged properly and think the ratio will tighten at some point. If not, I'm sitting on a stash of Gold Pandas. To me, GSR is like an index fund and I do not subscribe to a single strategy but look at many strategies are part of an overall plan to minimize risk and leave room for plenty of gains!

[HawkHybrid]

http://www.gold-eagle.com/article/gold-silver-ratio-reversal

 

the price minus speculators bit could be interesting.

 

HH

[KDave]

Gold and silver are becoming less scarce as the price rises. Interesting. And their algo thinks gold is cheap and silver is expensive? With this GSR it sounds ridiculous but they make a persuasive case. Bring on the cheap silver please. 

[vand]

I have spent a lot of time looking at the data on both Gold, Silver (and hence the GSR) lately.

What I can conclude is the following:

Since 1968 the mean value for the GSR has been 54. However, since 1968 the general trend has been towards a higher GSR, as gold has outperformed silver 7.4% vs 4.7% annualized in that time. Therefore, we have seen the GSR pushing these seemingly high numbers above 80 with more frequency in the last several decades.  I believe that this is consistent with the idea that "good money appreciates" - ie, that the best tool for the job will outperform everything else over a long period. 

So yes, the GSR at present is undeniably somewhat stretched at the current level, but not by as much, fundamentally as it was when it was at the same level 30, 20, or even 10 years ago. As I said, gold has outperformed silver, and there is nothing to suggest this continual outperformance will reverse. That means that the mean of 54 will creep up as gold's outperformance continues, and we should new highs in the GSR in the future.

So while I am more bullish on silver until the GSR swings back lower, in the very long term I have to say that Gold is probably the better bet. Reversion to the mean, and the mean as a moving target are not mutually exclusive ideas.

I have been working on a precious metals buying/allocating model based around ratios in gold, silver & wages. Needs a bit more work to make sure it all stands up, but I'm super excited about it.

[KDave]

48 minutes ago, vand said:

I have spent a lot of time looking at the data on both Gold, Silver (and hence the GSR) lately.

What I can conclude is the following:

Since 1968 the mean value for the GSR has been 54. However, since 1968 the general trend has been towards a higher GSR, as gold has outperformed silver 7.4% vs 4.7% annualized in that time. Therefore, we have seen the GSR pushing these seemingly high numbers above 80 with more frequency in the last several decades.  I believe that this is consistent with the idea that "good money appreciates" - ie, that the best tool for the job will outperform everything else over a long period. 

So yes, the GSR at present is undeniably somewhat stretched at the current level, but not by as much, fundamentally as it was when it was at the same level 30, 20, or even 10 years ago. As I said, gold has outperformed silver, and there is nothing to suggest this continual outperformance will reverse. That means that the mean of 54 will creep up as gold's outperformance continues, and we should new highs in the GSR in the future.

So while I am more bullish on silver until the GSR swings back lower, in the very long term I have to say that Gold is probably the better bet. Reversion to the mean, and the mean as a moving target are not mutually exclusive ideas.

I have been working on a precious metals buying/allocating model based around ratios in gold, silver & wages. Needs a bit more work to make sure it all stands up, but I'm super excited about it.

Great post. I had not considered the difference in historic price performance of the individual metals having a diverging effect on their ratio to one another, but it is entirely logical. Another piece to the puzzle. 

Price performance aside, the monetary aspect of silver is actually growing but this is apparently being hidden by falling industrial demand. According to the silver institutes 2015 supply/demand figures the industrial aspect has fallen but the investment demand has filled the gap. Is this likely to continue that the the key, because foregoing an unforeseen use for silver, industrial demand is not likely to increase until growth returns. 

Would love to see your work on wages to PM's if you don't mind sharing when your happy with it.

[JB3]

22 hours ago, vand said:

Since 1968 the mean value for the GSR has been 54. However, since 1968 the general trend has been towards a higher GSR, as gold has outperformed silver 7.4% vs 4.7% annualized in that time. Therefore, we have seen the GSR pushing these seemingly high numbers above 80 with more frequency in the last several decades.  I believe that this is consistent with the idea that "good money appreciates" - ie, that the best tool for the job will outperform everything else over a long period. 

 

Good point.

 

A manifestation of Gresham's Law, I guess: good money (gold) drives out bad (relatively, silver).

[vand]

Yes.. what silver/gold bugs need to realize, imo, is something that it is so obvious that we too often lose sight of it.. is simply that the GSR is simply a price. More specifically, of course, the price of an oz of gold as expressed in ozs of silver. We call it a "ratio" because we are conditioned to think in terms of local currency - for that is what we are paid in and what most things are commonly measure in priced it. However, when you think about it, the price of practically anything in common currency, eg a bar of soap in £s, it is merely another way of expressing it's ratio vs local currency. eg, if you want, you can say that a bar of soap can cost £2.50, or equally you can say it has a 2.5:1 ratio with GBP.

And as with soap, or a unit of say IBM stock, if you look at the historical price in the last 50 years, then the level of that "ratio" 50 years ago has little bearing on what it should be or might be today. You don't expect soap or IBM to go back to their ratio vs GBP that they were in 1968 because we understand that many fundamentals are in play which contribute to push that ratio in a particular direction.. It might flitter 20% higher one year, and 20% lower the next, but the trend is established.

And so it is with the GSR. Ultimately while they share many common characteristics, they are like Nike & Reebok. One can outperform the other with the better business model (ie fundamentals), as Nike strongly outperformed Reebok.

So looking at the historical GSR and expecting it to return to 20 or 30 is not that meaningful, and maybe not that realistic. Look more at what the GSR has been in more recent years and take that as fair value. 

I've been modelling several long term investment strategies that I'm backtesting on all the gold & silver data since 1968 and am quite excited by the possibilities that you can exploit if you understand the nature of the GSR and position yourself to take advantage of the brief buy highly lucrative chances that come about every no more than once every few years. The beauty of it is that it is entirely statistically driven and therefore no predictive analysis is required. Will share more when I have triple-checked everything...

[Murph]

You pays your money, you takes your chance.  

I think I'll take a chance on soap increasing in price after reading these posts as the GS(oap)R is out of whack. Not to mention I can afford much bigger bars of soap than gold and could even make my own given some oil and hydroxide.

Seriously though even if some industrial uses have declined in recent years I seem to recall that the amount of silver used for bullion has increased considerably over the last decade or two and may make up for some or all of the industrial decline.

[JB3]

It is true that the GSR is a price of gold expressed in silver, but that isn't the same as things priced in a fiat currency. It is more like things priced in other commodities, such as oil or corn. These are assets that cannot be inflated.

 

So while there is no expectation that a bar of soap will go back to the same ratio with currency as it had 50 years ago, you might find it does fluctuate around a mean when priced in gold, oil or corn.

 

And so it makes more sense that a GSR might revert to its value of 'x' years ago than that it will reach its price in sterling.

[DRooster]

The GSR is the reason I don't buy gold.

I got one sov from MadStacks some time ago and that is enough to satisfy my curiosity.

If the GSR was under 50 I might be tempted.

Gold buying is a keen trade right now and good luck to everyone, I just feel the "good value" is more with silver.

[KDave]

I think silver has a lot of potential as well, though it is less likely to have bottomed than gold currently meaning further falls are more likely than not. I prefer gold - currently my personal GSR target is to have 10 ounces of silver per 1 ounce of gold, thereby having 10% of precious metal allocation in silver. 

This has been mentioned several times already - the most interesting aspect of silver for me is the 2015 falling demand from industry being offset entirely by demand for bullion - in an environment when both the price of silver was falling and the price of gold was reaching more affordable levels. It is an odd development. It leads me to the possibly incorrect conclusion that perhaps we are seeing a fundamental change in silver from mostly industrial commodity back to its roots as a monetary metal, but who knows perhaps it is just a one off year. Looking at this development alongside the current GSR, increasing gold price and the growing potential of gold entering a new bull market and I am willing to gamble by adding a few ounces of silver gradually from here.

[vand]

On 3/7/2016 at 22:26, KDave said:

Would love to see your work on wages to PM's if you don't mind sharing when your happy with it.

I still consider it a WIP, but am happy enough to share what I've modelled far.

So, I have been backtesting various strategies of when to-

• buy both gold & silver (and in what ratio)
• buy gold only
• buy silver only
• swap gold for silver
• swap silver for gold

based solely on the GSR.

But rather than using the fixed historical average value of the GSR (which could not have been known back when the PMs first started free trading anyway) I have used a long term moving average of the GSR, and then played with various standard deviations of the GSR away from that moving average (rather like bollinger bands) to identify these key points.  These are not everyday occurences - to get the best long term returns in the model, I had to use very high deviations away from the mean that only come about every few years of less - and this makes sense, for extreme over/under is by definition not an every day occurence. The model has generated just 8 "swap gold for silver" and 5 "swap silver for gold" signals in the last 48 years.

It also attempts to factor in gold vs avg wage and to give you an indicator of when to buy more, and when to buy less precious metals. 

The model has generated over x10 times the return that I would have had if I had just bought the same fixed amount of silver every month since 1968, and x6.5 times the return if I had just bought the same fixed amount of gold every month.

At present, the model says "Buy Silver Only, and buy as much as you can".

It woud take a move in the GSR above 88 to trigger a more extreme "Swap gold for silver" action, and conversely a fall below 75.5 to stop the "buy silver only" flag.

The beauty of it is that it doesn't require any predictive power of what gold & silver will do. You simply buy what the model tells you to each month, and you should very handily outperform the market over the long run.

Here is my model in graphical form:

 

 

 

[HawkHybrid]

@vand does your model take into account of the hunt

brothers attempt to corner the silver market ~1979?

 

HH

[vand]

16 minutes ago, HawkHybrid said:

@vand does your model take into account of the hunt

brothers attempt to corner the silver market ~1979?

 

HH

 

It's a reactionary model which is price based only. The power of it is that it doesn't require any predictive analysis.

You can see that at the spike in 1980 the model accounted for the price explosion in silver by generating a "swap silver for gold" signal. It doesn't care why the relative prices moved as they did, it only tells you what to do in such an event. Likewise it doesn't care for trying to explain the large multi-decade short in the Silver market (China? JPM?), it only tells you what to do given current prices, and then what to do if and when those positions are unwound, should they cause an extreme move in the GSR.

Regards,

[vand]

Based on historical precedence, do NOT be surprised if silver rises 500%+ over the next 3 years:

http://www.bloomberg.com/news/articles/2016-03-21/gold-silver-ratio-says-it-s-time-to-buy-one-sell-other-chart