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Millionaire Now! by Larry Nusbaum

This blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth".

Gold & Silver

Posted on 04/13/2007 19:44:05 | Link | Post Comment

Here's why silver is a better investment than gold...Silver has all the same monetary properties of gold, and more!

The historic price ratio of silver to gold shows that about 10 ounce of silver would buy one ounce of gold, a 10:1 ratio. Recently, the ratio is about a 50:1 ratio (with silver at $13/oz., and gold at $650/oz.) As the silver to gold ratio returns to historic values, from 50:1 to 10:1, -

you may make over 5 times more money investing in silver, instead of gold!

Silver prices may rise to exceed the 10:1 ratio, for the following reasons:

Supply is price inelastic. Higher prices may not cause increased supply (production). Why not? Because most silver is produced as a by-product of mining gold, copper, zinc, or lead. Thus, higher silver prices will not substantially increase the amount of silver mined each year. In 1980, when silver prices went up to $50/oz., less silver was mined than in 1979!
Demand is price inelastic. Higher prices may not cause reduced demand (consumption). Why not? Because most silver consumed by industry is used in such tiny quantities in each application, such as in film or electrical contacts, that rising silver prices will not easily slow down the growing industrial demand. Additionally, as paper money continues to fail, people will buy silver and gold without regard to price, or they will increasingly buy simply because prices are going up!
Silver is money, the only true money of the masses, the people. Silver is for change, and is the "workhorse" money.
Silver has been consumed by industry. The world is running out of silver; industry consumes more than the mines produce.
There's no room for any investment demand to enter the silver market without driving the price sky high. We've just begun to see a little bit of investment demand.

Read: Silver - Bullish Forecast

I believe gold is about to surge to $800 and potentially higher. Here are some reasons why ...

Two India gold ETFs are launching
The first gold ETF in India is Benchmark Mutual Fund's Gold BeES. It launched on February 15. The second gold ETF in India is rolling out now, launched by UTI Mutual Fund. The new ETF is called, naturally enough, UTI Gold Exchange Traded Fund.
According to Rajesh Bhojani, President of Marketing for UTI Mutual Fund, about 30% of the gold market in India is investors. I wonder what the new gold ETF will do to that percentage?
Central bank gold stockpiles have swooned to a 60-year low
The International Monetary Fund (IMF) reports that the amount of gold held by central banks and other government organizations declined for the eighth straight year in 2006. Bullion holdings were 867.6 million ounces last year, down 1.2% from 2005, the lowest since 1948, according to the World Gold Council.
Investment demand is booming
Reuters reports that worldwide investment demand for gold should remain at historically high levels this year, with investors continuing to buy large volumes of gold in bullion, coin and jewelry. CPM's 2007 Gold Yearbook report predicted investors would likely add another 39.7 million ounces to their gold holdings in 2007, after investing 43.5 million ounces in 2006.
Miners can't find new deposits fast enough.
China can't get enough gold.

Read:

And, don't forget EWA, which is iShares MCSI Australia. It's moving up strongly.

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