The Gold/Silver Ratio and Traders Remorse

[mightyzep]

About 2 months ago, I went to a coin show and traded 32 90% halves for a 1/4 oz of gold. A 1901 half eagle. I got $11/half and thought it was a good deal, because gold was about $1400/oz. My safe deposit box was getting heavy with silver, and I thought this would be a way to get more savings into it. Today I see on coinflation.com that my halves are worth over $13 each and my 1/4 oz of gold isn't worth the $350 I bought it for. Then I take a look at the historical Gold/Silver ratio and see it is at a 15 year low. This isn't because gold is really down, it's that silver is really up.

Then I started to think, what is causing this? I got into CRH heavily just this year...I had done it before, but started to order weekly boxes in January. I had always wanted to find silver with my metal detector, but in 3 years I had found 7 silver dimes and 1 silver quarter. I got more silver than that in my first half box. I love silver. I have a lot of silver, I want more silver. So far I don't love gold.

Here is my theory. When I got my last half box, and found it skunked out and half full of shiny new 2001D JFKs, then I read another Bay Area guy had the same type of box, we discussed whether WE were the reason these new halves started showing up. We agreed we were the cause. Now how about that gold/silver ratio? Could WE be the reason silver is going up? It's sort of hard to imagine, as I don't buy silver for spot, I buy it at face and the only surcharge I pay is the sorting and rolling and time to cash it in. But as our hunger for silver goes up, maybe the world follows? I haven't been careful not to share my enthusiasm for silver with my friends and coworkers.

The other reason I see silver up, is that it is still relatively affordable. The dollar is down, sure, but it is not that satisfying to buy a gold coin smaller than a quarter for $350. When I am in the coin shops people come in and want to buy silver dollars. No one wants to feel ripped off, and the price of silver even at $37/oz is still such that the average guy can walk into a coin shop with $100 and come out with some nice big silver dollars. It's sort of like why I think stocks split. They want the basic unit of measure to be something the average guy can afford. Gold is already so high, the the sticker shock of trying to buy it causes it not to go up too much lately. I have grown to love half dollars. I even enjoy carrying around rolls and paying for gas and lunches with my coworkers with the halves. I enjoy asking the tellers for them. I enjoy the idea that although I feel mistreated and ripped off by the banks constantly with respect to my mortgage and all the bank fees, I can take a little back when I cull some silver from their vaults. This whole hobby is silly and still very appealing to me. But lately the silver take in halves is down for me. I can't believe I am going to go to the bank today and ask for a box of dimes. I got it bad.

 

[blkcwbyhat]

It's the "car dealer syndrom"! If they can't afford a mercedes,sell them a caddy...can't afford a caddy,sell them a buick,so on. I think this is also why cents are getting popular.I usually get 20 percent copper,so not only do I about double my money there,I always win! After seeing the results from nickels,dimes and quarters,they are not worth the effort,IMHO.

 

[65gt350]

Zep,

I will gladly trade you 27 90% halves for the half eagle if you want silver? I am local so there would be no shipping. Just like stock trading don't try to catch the falling knife. I know how you feel I have been trading the ratio from 46-48 but at least you get to look at a pretty coin versus QEII.

HH,
65GT350

 

[byrne3]

Zep,

I will gladly trade you 27 90% halves for the half eagle if you want silver? I am local so there would be no shipping. Just like stock trading don't try to catch the falling knife. I know how you feel I have been trading the ratio from 46-48 but at least you get to look at a pretty coin versus QEII.

HH,
65GT350

Wow, way to rub it in. You know how he feels? Sure, why don't you just trade him your 27 90% halves for 32 of his 90% halves. Then would you know how he feels?

 

[jim4silver]

Cost and value (true worth) are two different things. While nobody can argue with silver's great gains and the lowering silver to gold ratio, gold is technically cheap compared to silver now if you look at the ratio over the last 100 years. People always say the "historical" 15 to 1 ratio, but that ratio was set by the government and was not a true market price ratio. The price of gold and silver was "fixed" by the government until the 1970s.

If you look at a gold to silver price ratio chart from 1971 to present, most of the time the ratio was over 50 to 1 silver to gold, although it did dip below 20 to 1 for a short time and was as high as 100 to 1.

I like silver a lot but like gold too. I try to have 50/50 value wise. I may not make as much on the upside, but if there is a big correction I won't lose as much either.

I personally would feel more "sticker shock" buying an ounce of silver for 37 bucks per ounce than paying 1430 for an ounce of gold if I was going to buy right now.

Jim

 

[65gt350]

Zep,

I will gladly trade you 27 90% halves for the half eagle if you want silver? I am local so there would be no shipping. Just like stock trading don't try to catch the falling knife. I know how you feel I have been trading the ratio from 46-48 but at least you get to look at a pretty coin versus QEII.

HH,
65GT350

Wow, way to rub it in. You know how he feels? Sure, why don't you just trade him your 27 90% halves for 32 of his 90% halves. Then would you know how he feels?

I am just giving him an option to get back into silver. Why would I overpay right now. I think I am giving him a fair trade based on current ratio. I am not going back to the people I traded at 46:1 and asking for 8 oz of silver back for every ounce of gold. I made the trade and moved on.

My gut tells me he won't trade because that first piece of gold always holds a special place in the collection and is priceless. Like my post says at least he has a nice looking coin to look at instead of what I traded for.

One way to avoid the traders remorse is to stop valuing gold and silver in dollars but just in the number of ounces.

HH,
65GT350

 

[Yinzi50]

Glad that I have not told a single soul around me about getting silver for face since I started almost 3 years ago. Even though the competition still goes up in my area. My source bank told me that the carrier only deliver one box per trip vs 4 boxes that I requested.

 

[FreedomUIC]

In all honesty you really didn't buy gold, you bought a gold numismatic coin that you will have to hold for a couple of years to make a profit on. Buying GSE and GML are a different story. I would be extremely happy with my purchase and look at the coin every chance you get.

In three or four years, tell me if you still have buyers remorse.

By the way, can you post a pic of the coin, they are one of my favorites.....