We know that we may have higher inflation in the future with all the money printing from the Fed and other central banks and that it is a good time to buy gold $GOLD but what about Silver $SILVER ? Ray Dalio tells us to buy gold. Warren Buffett bought 3500 tons of Silver in 1997 but we all know that he doesn't like gold. Which one is a better investment?
The oldest economic data in history is the gold to silver ratio. It has been around for over 5000 years and has been recorded in Ancient Mesopotamia which was 2.5 at the time. In the Bible, the Gold to Silver ratio is 15. Today, the gold to silver ratio is at all time high at more than 100. This is because in recent years, investors and central banks have been buying more gold than silver. This gold to silver ratio doesn't make much sense. these are just numbers. But if we look at the abundance of the two precious metals, there are 17 times more silver on Earth than gold. It seems that Silver is undervalued compared to Gold.
Unlike gold, silver is more than just a precious metal. Silver is the best electrical conductor and has several industrial uses. In the future, the demand for silver will be increasing with the rise of electric vehicles and renewable energies. Solar panels contain silver. When Warren Buffett bought silver, it was because he saw a supply gap. We cannot really see the same thing today. So, if we're going to buy silver, it will be only because we expect higher inflation, higher demand and that the gold to silver ratio will return to its mean.
Ray Dalio always tells us to buy gold but he never mentions silver. I could not find out why he never recommended silver but I have a hypothesis, because silver is more volatile than gold and he doesn't like volatility.
But you should not forget that silver or gold or Palladium or Platinum are not value producing assets and they don't have any intrinsic value. The best way to have exposure to gold or silver is to invest in a miner. The problem is that Silver is most of the time a byproduct of other metal productions for example, gold, Zinc, copper, etc. I have one Silver miner in my portfolio, Polymetal international, which is a Russian gold miner. Polymetal is also the third largest silver miner in the world and has 20% of its revenues from silver.
As far as buying Silver itself or even the Silver ETF $SLV . Silver or Gold are not really investments. I see them as an alternative to cash. It is only here to protect you against inflation and I would not recommend anyone having more than 5% in one's portfolio in any of the precious metals.
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