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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
it’s 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 it’s 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?
Richard Mills
Aheadoftheherd.com
Richard is host of www.aheadoftheherd.com and invests in the
junior resource sector. His articles have been published on over 60 websites
including - Wall Street Journal, 24hGold, Kitco, USAToday, Safehaven,
SeekingAlpha, The Gold/Energy Reports, Gold-Eagle and Financial Sense. If
you're interested in learning more about specific junior gold/silver stocks
and the junior resource market in general please come and visit his site at
www.aheadoftheherd.com
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