by James Brumley | August 31, 2012 7:30 am
OK, this as admittedly a ridiculous scenario, but one worth contemplating — even if only to give a new perspective on an old debate.
Let’s say you’re going on a 30-year mission to the planet Neptune and will lose all contact with the world during that three-decade span. (See, I told you it was ridiculous.) The folks who are sending you into outer space are going to compensate you — before you leave — by writing you a check for $1 million. By the time you get back to the planet Earth you’ll be in your retirement years, so that $1 million will have to grow in value while you’re gone.
Clearly you can’t leave it in cash, since inflation will kill its value in the meantime. Let’s also take stocks off the table as potential 30-year holdings. Though it’s unlikely every company in the world is going to fold in the next three decades, let’s face it — you can’t have blind faith in any company given the global economy’s current status. In fact, we can pretty much narrow down your best investment options to a precious metal like gold or silver.
Obviously it’s a scenario that will never materialize, so it’s a question none of us will ever have to answer. But, it still seeds a question about the long-term metals market that does apply to all of us: Is gold or silver the better metal to bury in our backyards, apocalypse bunkers and portfolios?
Got an answer yet? Before you jump to conclusions, there is a handful of things to think about. Some of them are apocalyptic in that they’ll only really matter if the entire financial system collapses and currencies become useless. At that point, rare and precious metals become the de facto currency. Other factors to consider aren’t quite as alarmist, in that they assume the financial system will outlast your return to the planet. In no particular order:
You may have noticed one missing factor in the list of things that influence the price of precious metals: profitability. It’s not an omission. It’s a recognition that gold and silver returns — profitability — are wholly dependent on the those other five factors. With the perceptions and opinions of those factors changing daily, so too is the profitability outlook. And no, the two don’t move in tandem all that often.
Click to Enlarge Just for the record though, silver has outperformed gold for the past 10 years, and weighing the five factors above, by a score of 3 to 2 we can probably bet silver will hold that lead for the next thirty years as well. The reason(s)? It’s the more functional of the two metals and the less-volatile. Given enough time, whether or not the world as we know it ends, that superior “real” value will be realized.
So out of the two, silver takes the gold medal.
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