Silver, Two of Seven

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by
Richard (Rick) Mills
Ahead
of the Herd

 

 
 

As
a general rule, the most successful man in life is the man who has
the best information

In the time
of the ancient Babylonians – long before the periodic table – there
were seven sacred metals: gold, silver, copper, iron, tin, lead
and mercury.

In Roman and
Greek Mythology, the First Age was called Golden, the Second Age
Silver. Apollo, the god of truth and light, and teacher of medicine,
carried a silver bow.

The hieroglyph
of Isis (Egyptian moon goddess) is a crescent and images of her
are usually reproduced with her standing on the Crescent. This has
also become the symbol for silver – on old maps a crescent
shows the location of a silver mine.

Islamic alchemy
gave silver an important place, alchemical procedures were defined
in terms of silver – the silvering of other metals, the act of giving
other metals silver like qualities.

We’ve
long practiced the science (metallurgy) of separating silver from
lead – the earliest known workings of any significant size were
those of the pre-Hittites of Cappadocia in eastern Anatolia, the
first sophisticated processing of lead-silver ore was attributed
to the Chaldeans around 2500 B.C.

Silver metal
was recognized as more precious than gold when bartering in ancient
Egypt – this recorded as early as 930 BC. Silver’s use as money
in coin form began around 2600 years ago. The Lydian (present day
Turkey) Trite is considered by many experts to be one of the first
coins used as money. It was made of “Electrum,” a silver
and gold mixture. Egyptian silver in coin form began appearing around
300BC.

Silver and
gold have stood the test of time, as a medium of exchange, a storehouse
of value and a safe haven in times of turmoil.

The history
of fiat money has always been one of failure (most paper money economies
downfall can be linked directly to the costs of financing out of
control military growth and its wars). Every fiat currency since
the Romans started diluting the silver content of their denarius
has ended in devaluation and eventual collapse of both the currency
and of that particular economy.

For the very
first time in our history, all money, all currencies, are now fiat – the US dollar use to be gold backed and it was the rock all the
worlds currencies were anchored to – when the US dollar became fiat,
all the worlds currencies became fiat.

The Federal
Reserve first issued its debt based paper money in 1913. Since then
the US dollar has lost 95% of its value.

"The
major monetary metal in history is silver, not gold." ~
Milton Friedman, Nobel Laureate

In this author’s
opinion silver has a few unique twists:

Firstly as
a much cheaper precious metal silver is winning market share from
gold buyers. The higher gold prices go the more consumers will step
down to silver, more so if they think silver’s price will rise
substantially.

Today the gold:silver
ratio stands at 65.94:1

Gold $1224
oz/silver 18.56 oz = 65.94

Historically
the ratio has been 15:1

Since silver
made its nominal high in 1984 the gold:silver ratio has held
fairly steady at 45:1 – with the current ratio at 65.94:1 either
gold will have to fall or silver will have to rise to $27.20 in
order to get the numbers back in sync with 45:1.

To get back
to the historical average ratio of 15:1 silver would have to rise
to $81.60 an oz.

Silver, like
gold, also performs its function as a precious metal –
acting as a storehouse of value and a safe haven in times of turmoil – although, and herein might lie the opportunity, silver seems to
have been asleep on the job what with the historical gold:silver
ratio being so out of whack.

Gold does seem
to be performing admirably and in this authors opinion does not
seem set to significantly drop in price any time soon, the Dow on
gold’s terms:

• In 2000
gold made its $260 per ounce low

• January
2000 the Dow was 10,900

• 10,900
/ $260 per ounce = 41.9 ounces to buy the Dow

• Today
at 10,443 DJII and $1,224 gold it’s 8.53 oz to buy the Dow

Secondly silver
is an industrial metal/commodity which, unlike gold, is consumed,
therefore giving you a call on an economic recovery.

“Silver
is a unique metal that wins whether the economy is going well or
is in bad shape. In the latter, the investor buys it as a hedge
against the downturn in the economy and the markets. And if the
economy improves, then the industrial demand increases.”
~ Chintan Parikh, CPM Group commodity analyst

The bottom
line? Silver gives you a nice double play with prices expected to
perform well no matter what the prevailing economic or geopolitical
conditions.

Third silver
does not have the threat of much publicized Central Bank and IMF
sales constantly overhanging it – although silver does seem to trade
in lockstep with gold when this old bogey man is trotted out to
the herd.

Conclusion

In this authors
opinion, it’s not if, but rather when, the gold:silver ratio
will revert to a more traditional number and share price upswings
will trickle down to the very few junior silver producers, the soon
to be producers, developers and explorers. It’s for these reasons
that silver and silver junior precious metal company’s should
be on every investor’s radar screen.

Are they on
yours?

Reprinted
with permission from Ahead
of the Herd
.

September
16, 2010

Richard
Mills is host of aheadoftheherd.com
and invests in the junior resource sector. His articles have been
published on over 200 websites, including: Wall Street Journal,
SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey
Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington
Post, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary
Herald, Resource Investor, and Financial Sense.

Legal Notice / Disclaimer This document is not and
should not be construed as an offer to sell or the solicitation
of an offer to purchase or subscribe for any investment. Richard
Mills has based this document on information obtained from sources
he believes to be reliable but which has not been independently
verified; Richard Mills makes no guarantee, representation or warranty
and accepts no responsibility or liability as to its accuracy or
completeness. Expressions of opinion are those of Richard Mills
only and are subject to change without notice. Richard Mills assumes
no warranty, liability or guarantee for the current relevance, correctness
or completeness of any information provided within this Report and
will not be held liable for the consequence of reliance upon any
opinion or statement contained herein or any omission. Furthermore,
I, Richard Mills, assume no liability for any direct or indirect
loss or damage or, in particular, for lost profit, which you may
incur as a result of the use and existence of the information provided
within this Report. Richard Mills does not own shares in any company
mentioned in this report and none are sponsors on his website aheadoftheherd.com.

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