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Playing the ratio


SilverFox

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In the beginning of this year I contacted my local coin shops to hear how many oz of silver I could get for 1 oz gold. 73 was the answer. Even if I offered more gold, the ration was still 73. That was so disappointing that I refrained from doing the trade. The market ratio at that time, however, was 81.

My question is if anybody has found a way to do this exchange without having to pay 10 % to the middleman.

 

 

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You are most likely always going to have a greater  premium attached to silver as opposed gold, that is why I see if difficult to play the ratio with physical metal. If you go with an unallocated account, for example bullionvault, the spreads are way smaller buying and selling, no vat on silver and can be achieved fairly quickly. That said, would you ultimately trust such an organisation or be willing to give up the benefits of holding the physical metal. 

“Nowadays people know the price of everything and the value of nothing.” Oscillate Wildly

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Best way to play the ratio is with paper ETF's, I'm a firm believer in holding physical but a thousand or couple of thousand pounds in a paper contract rather than an ounce or two of physical gold is much better for flipping back and forward as the ratio changes.  

I've not done it but I've been researching how to invest a couple of thousand and just flip silver to gold and gold to silver as the ratio changes, if you can grow your silver a couple of ounces and gold at a gram or two per swap after any transaction fees then continually doing ths as and when the ratio allows the trade must work over the long term.

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play with ratio is not a thing that can be done easily in Europe. buyer premium when you buy silver, seller premium when you sell your silver. Gold seems have a lower premium in Europe.

you can try various German dealer, afaik they give the best price. but the two way  shipping eat quite a bit profile from you.

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Dealing in physical is absolutely the worst way to play the ratio. It is not what physical accumulation is for.

Buy silver if it is cheap, buy gold if you would rather, and hold both if you like, but for god's sake do NOT try continually reallocating physical silver for gold or vice versa simply because the ratio has shifted 10 or 20% in favour of one or the other, the spreads will absolutely hammer you.

Yes, you can play the ratio with paper holdings and derivatives, but you are doing little more than behaving as a speculative trader at this point. That's not to say that futures and derivatives can't be very useful at some point, but it is far from risk free.

And I still believe that nobody has ever converted any of these ETFs holdings to so much as an oz of physical and walked away with the metal in their hand.

 

 

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32 minutes ago, 4Nines7Hills said:

couldn't you play the ratio with paper ETF then convert the profit to physical

You are pre-supposing that the ratio will move as you expect and that there will be profit. What will you do if and when it doesn't, and you are sitting on losses instead?

 

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I am more optimistic than vand about playing the ratio providing that I would be able to get the transaction costs down to 5 % or less. And of course, 10 or 20 % gain is not enough. Rather, converting to silver at + 70-75 and gold at - 50. 

The ETF, well, I already own physical.... Besides, whenever I have dealt with paper I lose money, but so far physical has been profitable for me. I dont mind giving away one for the other as long as I get more metal by doing so.

BTW, both silver and gold bullion seem to become very interesting in 2017. Another 150 dollar down for gold and 3-4 dollars for silver and I will by buying bullion actively.   

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I did a lot of work and modelled this, and yes there is a time to "play the ratio" in the GSR with physical, but it should be a once in a decade type event when the GSR moves to the very extremities of the distribution curve.. this is a very slow moving target but at the moment I have GSR >90 or GSR <36.

you may want to read this whole thread for why I have these numbers in mind:

 

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