Silver Chartbook – 3 Sides To Each Coin (Commodity:XAGUSD:CUR)

Gold has a density of 19.32 g/cm3, whereas silver has a density of only 10.49 g/cm3. Thus, a 1 oz bar of silver will be almost twice as large as a 1 oz bar of gold. Considering that the ounce of gold is about 72.38 times more valuable than silver (the price of one ounce of gold US$1,945 versus silver US$26.87) makes from a size perspective (you need a pretty big personal safe to store some silver), gold is the much more attractive, long-term, wealth-preservation instrument. But there are three sides to each coin.

When gold (XAUUSD:CUR) and silver prices will rise to much higher levels than right now, even small denomination gold coins will be unsuitable for actual physical barter. And yes, we have seen historical times where actual barter is of much use. With silver (XAGUSD:CUR) as well as the iShares Silver Trust ETF (SLV) and the Sprott Physical Silver Trust (PSLV) still being much undervalued also from a risk-reward perspective of the actual price increase, we find silver should be one of the primary holdings of your overall wealth preservation portfolio. We mentioned in the past that Bitcoin (BTC-USD) even though in a much lower proportion could as well be a sensible instrument to be held. This is for long-distance value exchanges that could be necessary for an unstable future.

Gold/Silver-Ratio, Monthly Chart, Three Sides To Each Coin

Gold-Silver-Ratio, monthly chart as of September 11th, 2020.

The monthly chart of the Gold/Silver-Ratio shows how silver has partially caught up. We expect lower levels in the long term, making silver an attractive long-term bet. Right now, the ratio has found support above the 70 levels. It would come as no surprise if temporarily gold would front-run silver for a tiny little bit again. This and the co-factor that the 200 simple moving average below supporting temporary stability were warranting us to take partial profits on our recent silver reload.

Silver, Weekly Chart, Worth Taking The Risk

Silver in US-Dollar, weekly chart as of September 11th, 2020.

On the 8th of September, we posted in real-time a weekly long entry for silver in our free telegram channel. The chart above shows that prices had declined into a fractal support zone that allowed for low-risk market participation. At the same time, we also initiated a gold position which proved to be the stronger candidate. While gold allowed for a handsome financing point (see our quad exit strategy), silver was lagging. Consequently, we cut the position in half to lock in minimal profits, but more importantly reduced capital exposure risk. Our focus at all times is less on maximizing profits and rather more on protecting our assets, knowing there is plenty of fish in the sea and always another opportunity awaiting. However, this is true only for those who have assets to play the market though. If you don’t follow proper risk mitigation strategies and lose too much in one single trade or investment, you cut yourself short of all these opportunities that constantly show up in the markets.

Silver, Daily Chart, Risk Control And Profit Taking

Silver in US-Dollar, daily chart as of September 11th, 2020.

The daily chart illustrates how we again were able to take further profits on the 10th of September. Now we are comfortably left with 25% of our original position size for all eventualities of what the market might decide where the price is heading. The prior weekly chart shows how silver is trading right at the point of control (the yellow line), which still proves the exposure is worthwhile.

It all comes down to risk and practicability

For your short-term trading, it is wise to be a specialist. Focus on fewer instruments and become consistent in profit extractions.

In the long term, a diversified approach is principle-based. The longer the investment horizon, the harder to predict the future. There you want all three sides of your coins to be covered.

This might sound like a generalization, but too often we see market participants throwing many eggs against the wall on small time frames hoping for something to stick. This is mainly due to a lack of a well-defined trading system. And they put all eggs in one basket when it comes to wealth preservation for the long term. But what if governments confiscate gold as they have in the past and that was your only nest egg. You could take a huge draw-down. The scenario most to be avoided by any speculation approach.

Disclosure: I am/we are long PHYSICAL PRECIOUS METALS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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