By Keith Weiner
Orders of Preference
Last week, we discussed the growing stress in the credit markets. We noted this is a reason to buy gold, and likely the reason why gold buying has ticked up since just before Christmas.
Many people live in countries where another paper scrip is declared to be money — to picture the absurdity, just imagine a king declaring that the tide must roll back and not get his feet wet when his throne is placed on the beach — not real money like the US dollar.
Holding back the tides is serious business… apart from his odd obsession with the waves, King Cnut the Great, son of Sweyn Forkbeard, King of all England and Denmark and the Norwegians and of some of the Swedes, is reportedly known to historians as the most effective Danish King England ever had [PT]
It should be obvious, but we have seen much disinformation out there promoting the idea that the dollar is collapsing. Most of the time, most of these people buy dollars as the escape hatch from their native currencies.
They buy the dollar first, and gold (for now) is a distant second.
That leads to the question of silver. Do they buy silver in equal measure as gold, or is silver a distant second to gold, as gold is a distant second to the dollar.
Theory tells us that gold is more portable. It is much, much more portable. First, the same weight of gold is about half the volume of silver. A 1oz gold Maple Leaf coin (which is pure gold) is much smaller than a 1oz silver Maple.
And right now, the value of an ounce of gold is just about 70 times greater than the value of an ounce of silver. The math works out that the same value of silver is 126x more bulky than gold.
If you are paying for storage, that may be important. It sure is, if you are thinking you may need to carry it on your person. A gold bar worth $120,000 would fit in your trouser pocket (a bit heavy at 3kg, but you could do it).
That much silver would be almost 7 of those big bars which are the size of small loaves of bread. Each. All that silver would weigh about as much as two heavyweight boxers. Gold is also more liquid.
A cartoon from a time when even attempts to inflate the money supply via silver were considered dubious…[PT]
Fundamental Developments
What does the data tell us about demand for silver relative to gold right now?
We will look at that below in the only true picture of supply and demand in the gold and silver markets. But first, the price and ratio charts.
Prices of gold and silver – click to enlarge.
Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It moved down this week. Is it approaching a line of support?
Source:: Acting Man
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