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Gold Is Down 35%; Silver Is Down 62%.

Written by Gary North on June 26, 2013

On April 3, 2011, silver was at $35. On April 28, it was at $49. This was the final move up. The silver bulls seemed to be in the saddle.

Silver closed yesterday at $18.55. That is a decline of 62%.

Gold peaked on December 6, 2011, at $1,895. Yesterday, it hit $1,234. That is a decline of 35%.

It is always this way. Silver is far more volatile than gold is. I have been writing about this for many years. On February 8, 2006, I wrote this.

Silver, in contrast, has been completely de-monetized. It is an industrial metal or a jewelry metal. Its price peaked in January, 1980, at $50 an ounce. It then fell for the next 23 years, bottoming at $4.67 in January, 2003. That was a 90% loss of price, but really closer to 94%, because of the fall in the dollar’s value, 1980—2003. In short, silver was an investment catastrophe for over 20 years.

Gold is perceived as a money metal that is used by central banks. It is used by Asians as an inflation hedge. Silver has lost that perceived value. So, silver is more volatile. There was nothing to prevent its fall after 1980.

There is something else to consider. For almost the entire 23 years of its price decline, there were bullish silver brokers who kept talking about the huge gap between low silver production and high silver consumption. Here is my question: If that argument led to losses for 23 years, why should anyone believe the same argument today? There was a negative correlation for most of those 23 years between that argument and the price of silver.

I am reprinting this, because the silver bulls are in their bunkers for now. We hear nothing about the supposed discrepancy between silver supplies (low) and silver demand (high). But there will be another boom in silver, and then the silver bulls will emerge from their bunkers, dust off the 1975 arguments from the late Jerome Smith, substitute some new figures, and once again lure newcomers into the trap.

When the reversal of the precious metals comes, silver’s price will rise faster than gold’s price. Silver is volatile. The silver bulls are far more vocal than gold bulls. They have been for over 40 years. They will come out of their bunkers and proclaim silver as the way to make money. This is correct — in the boom phase. If you buy silver at the bottom and sell at the top, you will make more money than if you buy gold at the bottom and sell at the top. But will you?

Note: silver peaked in 2011 over seven months before gold did. If you invest in silver, your timing had better be very good.

Here is my recommendation: Speculate in silver. Invest in gold.

If you adopt “buy and hold,” put 80% of your precious metals investment in bullion gold coins and 20% in bullion (“junk”) silver coins.

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9 thoughts on “Gold Is Down 35%; Silver Is Down 62%.

  1. This may be true if you have a wealth of money that the average Joe doesn't have. If according to the information provided if Gold was to return to it's pervious high that's a 35% increase but Silver would iincrease 62%. I use silver to barter, @ a 10.00 Spot est. old silver dime are 1.00, Qtrs are 2.50 etc. and they work well at swap meets and garage sales and other places if you know them. If you're buying big ticket items Gold works best with a few Gold coins you can barter for cars, guns, or other stuff. Example Est. 1lb Gold 20 thousand Dollars 1lb Silver 200 Dollars one would only have to buy 8 thousand Dollars (40lbs) of Silver to reach the profit equal to that of 1lb of Gold.

  2. Texas Chris says:

    I bought silver paycheck by paycheck, and when I had enough to trade in for a gold coin, I did so. I also bought gold in foreign countries when I worked overseas.

    No matter how you do it, just do it. Buy the metals. Trade up. Just buy. Grow your pile.

  3. Here's my recommendation: Don't speculate in silver. Don't invest in gold. Use them both as savings vehicles for preservation of value in a digital currency world. Currencies go to zero. Commodities don't. Silver and gold are very durable, storable, divisible, fungible commodities which can be used for barter if a currency goes the way of all currencies. Don't worry about the "price" of the commodity except when it comes time to buy–you want to get the most for your money. Silver, btw, has more different industrial uses than any other substance besides oil. It's not likely there will ever be no demand for it. And when the industrial users see the supply getting very tight, and it will, they'll be scrambling to stockpile it. That will be a circus.

  4. Good advice. Just one thing, Chris–right now, I'd be buying silver with gold. At 65:1, silver is a bargain compared to gold. When prices go up, the ratio will get much smaller. At the peak of the 1980 frenzy, it was about 17:1. That's when to do the opposite trade.

  5. Hang on to the metals, paper will soon crash and all it will be good for is to wipe with !! benny has just about killed the dollar…

  6. Meathead says:

    Buy as much in "junk silver" as you can while the price is down and hold it. Silver at $500 – $1,000 an ounce seems ridiculous at the moment, but there is an economic collapse coming and gold/silver will soar. Silver will soar by a higher percentile than gold and will provide the bigger "gain". When the dollar is toast and no one will accept it for payment, the old dimes, quarters and halves (90% silver) will be the thing to barter with. You can always do what Americans did when America was young; cut them in pieces of four or pieces of eight.

  7. bernanke says:

    battered and annihilated gold stocks will out perform both those metals.

  8. Bob Marshall says:

    When i purchased gold and silver it was at the highest level., i honestly believe that gold and silver is dropping so the elite will be able to purchase both gold and silver at extremely low prices before the prices rise again. If they do.

  9. david pasztor says:

    yeah that might be the new thing to do now, ride the gold and silver prices up and down just like the Stock Market.