It's hard for some to even contemplate what to do with his or her hard-earned winnings from life. After earning the money, paying the bills and then paying the taxes, it's amazing we have anything left over to invest. When we do manage to save a little, we see it eaten away by inflation. The bank only pays about one percent (taxable), while the true inflation rate is much higher.
I get calls daily wondering about whether now is the time to invest in precious metals. Some people feel that gold has already made big gains and that jumping on now is the wrong thing to do. Everyone seems to be waiting for the "big correction", so they can get on board. Unfortunately, gold does not seem to be correcting lately. In the past six months, gold has gone up about 20%. Silver, on the other hand. has been flat over the last six months.
In the early 1800s, the gold-silver ratio was set at one to fifteen, and soon corrected to one to sixteen. Then, for a while, the "correct ratio" was one to thirty-two. Today, the gold to silver ratio stands at one to eighty. It has not been that high in the last eight years. (Check out the gold to silver ratio for yourself on our site's Charts Page.) From that ratio alone, I would say that either gold is overvalued or silver is undervalued. Sometimes, silver simply lags gold's upward momentum.
Too late to profit from gold's latest upsurge in price? Who knows?
Too late for silver? Doesn't look like it.
Remember that depressions are not about making money. They are about preserving investment capital for a better day in the future. In the meantime, invest in something real.
Larry LaBorde
Silver Trading Company
Feb 2003
