No. of Recommendations: 1
The gold/silver ratio seems to be strong for silver right now. In the past year it has ranged between 59 and 48. It currently is at about 52. Over 10 years it ranged from about 84 to 32. So, on either time frame we are below average for the price of silver relative to gold. That does not guarantee anything, and, of course, the ratio could improve even on falling prices, but it is worth considering....

I will also point out, though, that the "debasement" of currencies that makes many interested in precious metals (PM) is not as simple as it seems, as shown by these three charts from the St Louis Fed:

M1 Money Supply: http://research.stlouisfed.org/fred2/series/M1

M2 Money Supply: http://research.stlouisfed.org/fred2/series/M2

Velocity of Money: http://research.stlouisfed.org/fred2/series/M2V

So, the FED is printing money, and we clearly see that in sharp increase in M1 beginning about 2008. But M2 rate of growth does not show such a change (a little flat during the recession, a bit of a ski-jump after, then back to trend. And velocity has slowed way down. Remember, the main creator of money in our economy are the private banks, and they do it by making loans. So, there is no assurance that this supposed debasement of the money supply will effect precious metals over the long haul beyond the modest inflation rate we currently are experiencing.

I would conclude that some PM in your account at this point might be wise to counter inflation and currency exchange fluxuations. If you are a real doomsdayist, then perhaps collecting silver coins - much easier to deal with than owning physical gold. There have been and will continue to be good times to try to capitalize on the shifting trends in PM values - and this might be such a time for silver. But I am not ready to assume that it is all silver lining and no clouds going forward for silver.

Cheers,

Doug
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