Episode Details

IMPORTANT: somebody has been impersonating me on here and asking readers to message them on WhatsApp. Obviously it is not me. Don’t engage. Stop engaging and block, if you have started. And DON’T send any money.

It’s a question that comes up a lot. In fact, a friend was asking me just this week, so let’s try and resolve it here and now, once and for all: gold or silver - which should you buy?

Full disclosure: in my own portfolio at one stage I was geared as much as 70% towards silver and 30% towards gold. But in 2011, when silver went to $50, I rolled into gold and never went back. My physical allocation is now probably something like 90% gold and 10% silver.

(For clarity’s sake: we are not talking about mining companies - these are a different kettle of fish altogether - just physical metal).

Make no mistake: silver has a great deal more potential than gold. There is every possibility that the silver price could triple or quadruple from today’s price just below $30/oz. It could even go to $200. But my experience of 20 years investing in silver is that if it can find a way of disappointing, it will. The out-and-out silver bugs all scream manipulation, and maybe the silver market is manipulated and repressed. For sure, if all the longs on the futures exchanges were to hold out for delivery, the silver price would go shooting up. There is not the physical supply to deliver on all the contracts. That applies to many commodities, though none, it seems, consistently to the same extent as silver. But why invest in something if forces stronger than you are repressing it?

It is unlikely, meanwhile, that gold will triple or quadruple from today’s price of $2,300/oz unless we enter into some kind of currency crisis or extreme inflation.

Then again, the silver price could easily halve from $30/oz. I don’t think a 50% correction in gold is likely, outside of some deflationary financial panic or liquidity crisis such as we saw with COVID in 2020. In any case, any such correction would be temporary.

Reasons to Buy Silver

My friend was told to buy silver because the silver-to-gold ratio at 80 is high and should come lower. Let’s consider that argument.

There is 15 times as much silver in the earth’s crust as there is gold, and throughout all of history, the monetary ratio between the two reflected natural supply. Fifteen silver coins got you a gold coin.

But silver stopped being used as money in the late 19th century. The many gold rushes of the period increased gold supply so that most countries around the world followed Britain’s model and adopted pure gold standards (more on this here). By 1900, China was the only major country in the world on a bi-metallic standard, which included silver. Every other nation was on gold.

In my lifetime, the silver-to-gold ratio has only once gone back to its natural levels of 15, and that was in 1980 for an afternoon, when the Hunt brothers’ attempt to corner the silver market reached its climax. The reality is that the silver-to-gold ratio has been gradually getting higher for a generation