Physical Silver Is The Investment Of The Decade

We just attended a webinar organized by Eric Sprott and his respected partners John Embry and Rick Rule. These are well-known names within the precious metals community, partly because of their huge success but also because of their physical trusts (ETF’s) which guarantee full backing of the precious metals.

In the introduction, Eric Sprott made the point that the crisis is not over, although media and officials pretend so. There are many events that point to the fact the crisis is not solved. Think about the large Italian bank Monte Paschi which was bailed out because of their derivatives bets, the Dutch SNS Bank which was bailed out a weekend ago, the currency devaluations in Venezuela and Japan, etc. Linking this to gold, Eric Sprott said: “The people in Venezuela that held gold instead of cash or money in the bank did not suffer the devaluation, neither did the people in Japan.”

Think about it, in the case of Venezuela, the people holding gold had an appreciation of more than 40% of their asset just overnight. The currency war has only just begun and there are already so many cases in which gold and silver have served as a true preservation of wealth.

Additionally, Eric Sprott made the point that there is no recovery based on several figures. At the beginning of 2012, the estimated growth was 3.5%. But apart from what was realized in the stock market and some investment products that were issued by the government, what happened to people and the economy shows a totally different picture. In the US, there is a negative real GDP, a 2% tax increase, the highest gasoline prices ever for the time of the year, etc. The treasury department reports on a yearly basis their debt situation (US). “The 2012 figures showed that the present value of known liability went up 4.7 trillion dollar plus a cash deficit of 1.5 trillion dollar results in some 6.9 trillion dollar deficit given a GDP of 16 trillion dollar. There are too much commitments from the US which cannot continue, entitlements will have to be cut in the US.” Those figures do not show any economic recovery.

The Case for Gold

Current economic conditions are fundamentally bullish for gold, as summarized in this quote (Source: Markets at a glance, November 2011):

Gold and silver are not traditional commodities, they are money. Their value lies in their ability to retain wealth in environments marked by negative real interest rates, government intervention, severe economic uncertainty and vulnerable banking institutions.

The physical imports to China in the past two years have been astonishing. It contributes to gold’s bright outlook. Gold follows goes where wealth is created

An interesting slide with the title “Gold’s changing fundamentals” was presented during the seminar. It shows the evolution of physical gold purchases since the beginning of this bull market.

gold physical demand sprott gold silver experts

The Case for Silver

Eric Sprott and his partners are convinced that the case for gold is good, but the case for silver is excellent. They consider it “the investment of this decade”, as shown in the next two slides.

silver investment of decade gold silver experts

Personally, we find the following table really insightful. It compares today’s gold to silver price ratio of around 53 with the geological and historical gold to silver ratio, but also the GLD to SLV dollar based trading. Those ratios really put silver into perspective. The figures tell an interesting story on their own.

silver physical demand sprott gold silver experts

Eric Sprott adds to this slide: “Most bullion dealers tell me that half of their business is in gold and half in silver. It means around 50 times more silver is being bought than gold. That cannot go on forever.”

The Case for Platinum & Palladium

It is no secret that Sprott has become a big fan of platinum and palladium. In a very recent infographic they explained the demand / supply fundamentals and the metals’ strong outlook. The next chart show the structural deficit in both platinum and palladium, which is a unique event since this precious metals bull market.

palladium platinum demand supply gold silver experts

Sources: Johnson Matthey Platinum 2012 Interim Review, CIBC World Markets Equity Research 2012

7 reasons why Sprott funds outshine competition

In closing, one of the last slides listed the benefits of owning the trusts from Sprott:

  • secure storage
  • bullion assets not held with a bank-owned custodian
  • potential tax advantage for certain US investors
  • ability to redeem units for physical bullion
  • investment in physical bullion only
  • fully allocated physical bullion
  • potential to trade at a premium to the net asset value

More information about Sprott’s offering is to be found here


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  • Gordon Barlow

    I don’t like getting into any argument about which is the better store of value – silver or gold. The important thing is for investors (and I do mean investors, not speculators) to include SOME precious metal in their portfolios. Here’s how I handled the matter in my personal blog, in a post last March. Fair comment, I think.

    Imagine a new-born baby being given a $35 gift certificate in 1971 and
    his twin given a one-ounce gold coin. Guess which of them would be the
    most pleased today. The one with the coin could today buy almost fifty
    times as much stuff as his brother could, with the gift. I can hear my
    grand-daughters now, “Grandpa, thanks for the $1700 birthday gift
    certificate (as if…!), but could we please have a gold coin instead?”

  • http://twitter.com/GoldSilver_Rush Gold Silver Worlds

    Fair comment Gordon. The idea you transferred is exactly the reason why I started this website, to transfer these types of ideas and prove – based on facts & figures – that what the idea you presented in a simple way is entirely correct in a complexer world. Regarding your first point, well I personally look at it as gold being the metal that preserves your wealth and silver than can preserves wealth on margin.

  • http://www.facebook.com/john.fox.520357 John Fox

    I’m getting tired of hearing of this “historical ratio of 16:1 for silver to gold”. I just saw a chart that went back to 1882. 131 years. And ONCE did it get CLOSE to that level. that was for a brief period of time when the Hunt brothers made silver spike up, and it reached a ratio of 14:1 for a day or two. Literally. Other than that, for the last 130 years, it looks like the average was about 42:1. Yet we keep hearing about the ratio which comes from EGYPTIAN times. Who CARES! Gold and silver were peged and static for most of that time. ONce they were allowed to trade fereely, it shows that the ratio went to a more relaistic level, which is MUCH higher than that. For 130 years, it has averaged 42 times silver to get an ounce of gold. Why not use a REAL number … unless you are trying to prove a point you already determined you want to make, instead of objectively looking at the charts and reporting what they REALLY say. Ahhh – now I understand why he uses a ratio from the Eyptian times!

  • http://www.goldsilverworlds.com/ Gold Silver Worlds

    John, I see your point and it’s a valid one. I have a long term gold to silver ratio chart on this site where you see the point that you are making:
    http://goldsilverworlds.com/20-key-gold-and-silver-price-charts-till-2012/#very%1F_long_term_gold_to_silver_ratio

    Obviously I have been thinking about this matter as well and my personal conclusion is the following. First, no one can predict the future; we can only make educated guesses based on today’s facts & figures. Second, we are living in unique times in which, specifically for silver, the following things are happening simultaneously: the industrial demand (which is 50% of total silver demand) has never been as high as today (with an astonishing number of applications & products in which silver is being used) + a very high investment demand which will probably increase as gold becomes too expensive + a decreasing supply as a lot of the silver used in products and industries really disappears from the available stock. I personally believe the case for silver has never been better, although not reflected in the price chart of the past 15 months. I believe that COULD lead to an appreciation relative to gold, but personally can’t predict if it will hit 16:1. That’s my opinion.

  • Murray Saugstad

    How safe is the ishares silver ETF? (SLV:US) Such a pain to monkey with several thousand ounces of bullion. Looking for something easier to handle.

  • http://www.goldsilverworlds.com/ Gold Silver Worlds

    @d24f9b68d708733287274d230826340a:disqus Did you have a look at PSLV?

  • http://www.wholesalegoldgroup.com Michael MacDonald

    Buying gold and silver has always been a favorable investment as compared to other investments. The value of gold and silver is recognized all over the world and therefore it is your currency which is valid everywhere.

    Therefore, it is a good time to invest in gold and silver. It would be good if the investment is done for a longer period of time.

  • http://www.goldsilverworlds.com/ Gold Silver Worlds

    Michael, I can’t agree more … I once heard someone who made a small fortune saying about investing “I made more money doing nothing than doing something.” The most important work is the research of what to invest in.

  • Pingback: Rick Rule: Gold Fear Trade, Silver Greed Trade, Platinum Math Trade | Gold Silver Worlds()

  • SilverShower

    when it becomes a pain, just toss it in the air and let it shower down on you. It works everytime ! Makes me feel like Uncle Scrooge McDuck !

  • Patrick

    Silver is no doubt a good investment and it feels severely undervalued but there is one fundamental reason why it shouldn’t rise as much as gold – and that is gold’s purpose as money. If you look at the major players like China and Russia, they are stocking up on gold and not silver. That should be something to think about…

  • Strawman

    I have always taken a much more simplistic view on the need for G/S. When the S has truly hit the fan, the poor common folk that I imagine dealing with are much more likely to recognize, and be willing to barter with silver than with gold. Gold will be fine for some kind of very large purchases. Buying a loaf of bread or paying to have something repaired however and expecting change from a gold coin may be too steep for most. I have even begun buying copper bullion now just for those times.

    I imagine a time when the folks out away from the major urban areas will revert back to historically recognizable forms of money, namely gold, silver, copper.

  • http://www.goldsilverworlds.com/ Gold Silver Worlds

    Copper bullion as a medium of exchange?

    I have a hard time to imagine your second point, but can’t exclude it. Energy consumption and quality of food / air could maybe force us one day.

  • Pingback: Gold Fear Trade, Silver Greed Trade, Platinum Math Trade | Money News Now()

  • Taunto

    You’re ignoring the fact that a player like China or Russia couldn’t possibly make the kind of significant investments in a market as thinly traded as silver. If the margin for total world investment annually is less than $3 billion (per Ted Butler) either country could buy that in one day.

    When you CAN’T buy something in volume, you buy the next best thing in volume. You have confirmed the issue is SUPPLY, not that the underlying asset is less desirable.

    Silver is da bomb.

  • Taunto

    If you want pain, wait until there is a delivery default and you get green paper handed to you while silver goes stratospheric. SLV, breakfast of chumpions.

  • Taunto

    You miss the point entirely. It was pegged at 16:1 or so because it is about that much more plentiful in mineral form in the earth than gold. On a simple availability scale, it should be about 1/16th as valuable as gold.

    Obviously that excluded varying demand factors, cartelization influences, geologic factors, what is chosen as a monetary standard, etc. But the point is, on the basis of just availability, it should be 16 times easier to find than gold. And since there is vastly more gold available above ground than silver (vaulted rather than in use as silver is) you could make the point on any given day it should be MORE expensive than gold since it is more widely used and less is available in ready form.

    The Egyptians didn’t pull this number from out of their asp. It is based on earth science. Look into it some time, you might learn something,