We have already published a couple of articles about precious metals and their value for asset protection nowadays which you can find here and here.
Now I’d like to mention a strategy with precious metals, which can increase even further the earnings described in our first article. Please read the first article if you did not read it yet, especially the paragraphs about putting 10.000 euros into a savings account or into gold back in 2006 as an investment option for the child born in the same year to offer him a solid amount at his majority. This will help you to understand our current article.
As you surely know, there is not only gold as an option to invest money into precious metals. There are further precious metals, like silver, platin, palladium etc. But let’s concentrate on silver as another century-proofed investment to better understand the impact of the swap strategy.
The point is that gold and silver both have a centuries-long track record in value saving. And the fair ratio between them is well validated by dozens of measure methods in the meantime. The gold-silver ratio (GSR) is actually the price of each metal in relation to each other. If the price of one ounce gold is at 2519,25 euro and that of one ounce silver at the same time is at 28,91 euro the ration is 2519,25 / 28,91 or 1 ounce gold is worth of 87 ounces of silver.
The fair ratio between gold and silver can be measured, for example, by comparing the available quantities of metals on the markets, by calculated quantities of gold and silver in the earth’s crust, historical averages etc.
In the course of the years a fair value stabilized in the range between 45 and 75. In other words, if the price of one ounce of gold was currently equivalent 85 ounces of silver, the silver is most probably undervalued or simply “too cheap” on the market. In this case it is worth investing rather in silver than in gold. If the price of one ounce of gold would be equivalent 40 ounces of silver, silver would be overvalued, and its price might drop vs. the price of gold. In this case it makes sense to swap your investments from silver to gold.
Now, let’s take the same example as in our first article, but apply the above-mentioned swap strategy and see how the value of your investment would increase in this case compared to the value growth described initially.
As the taxation of your investment and your wealth is different from country to country (for example, your personal metal investments in Germany are completely tax-free if you hold them longer than one year. Applying the swap strategy and holding the metals less than one year in your vault could cause unnecessary taxation of your metal sales; in Switzerland, the owned metals on the personal level are subject to the wealth tax, but it is just somewhat about few per mill etc.) we’ll skip the tax topic and fees for simplicity reasons. You can check what exactly is valid in your country to calculate the results more appropriate for your individual situation.
This example is simplified but has a purpose to show you the opportunity behind the swap strategy.
The initial situation described in our first article was:
If you would have invested the same 10.000 euro and purchased gold at the birthday of the child (634,50 euro per ounce back in 2006 = 15,76 ounce put into the vault dedicated to the child), at the majority in 2024 this amount of gold with the actual prices in October 2024 (2521,90 euro per ounce) would mean that the child would have 39.745 euro in gold (nearly 4 times more than the invested amount).
Now, let’s apply the swap strategy and see which result would be achieved in this case.
Picture 1: GSR since 2006, chart produced by bullionbypost.eu; red marks by Singabiz
As you can see on the screenshot produced on the website of bullionbypost.eu, during the mentioned 18 years (2006 to 2024) there were approximately 7 moments which were suitable to swap. It means, that such swap moments (suitable even for a lazy private person) do not happen often. You can check the GSR once per week or once per month and can be sure that the interesting moment will be noticed in time, even if you swap a bit before or after the best point.
The starting point is the same as in the initial example: you invest 10.000 euro into gold at the price of 634,50 euro as of 2006 and purchase 15,76 ounces of gold.
You do not need to do anything until the end of 2008, when the ratio jumps up to 1:89. Now, you “exchange” 15,76 ounces of gold against 1402,64 ounces of silver (15,76 x 89).
The next calm period takes you to May 2011, when the ratio becomes 1:32. For 1402,64 ounces of silver you get 43,83 ounces of gold.
The next swap time comes in March 2016. The GSR is at 1:82. For your 43,83 ounces of gold you get 3594,06 ounces of silver.
In August 2016 the ratio drops down to 1:66. You decide to swap again from silver to gold and receive 3594,06 / 66 = 54,45 ounces of gold.
In March 2020, the irresistible ratio of 1:119 makes you swap again from gold to silver: 54,45 x 119 = 6479,55 ounces of silver.
In spring 2021 the ratio drops down to 1:67. You swap again and receive 6479,55 / 67 = 96,7 ounces of gold.
As in September 2022 silver becomes “cheap” again (1:93), you switch from gold to silver and receive 96,7 x 93 = 8993,1 ounces of silver.
As the majority of your child approaches and there are no significant ratio changes afterwards, you keep silver instead of gold in your vault.
The present on the 18th anniversary of your child is 8993,1 ounces of silver with the value of 8993,1 x 30,67 euro (as of 12.12.2024) = 275.818 euro.
Surely, the above example represents an ideal situation without counting for taxes (different from country to country. In an ideal situation you would not even pay taxes at all on the above earnings). There are also no handling fees (agio) or storage fees considered. But even if we would deduct somewhat around 30% on different fees and taxes and in order to count for swaps at less favorite moments than in the above simulation, you still have a nice amount of roughly 200.000 euro as a birthday present.
Compared to an amount of 39.745 euro (if you would just keep gold in your vault and not do any swaps) it is a value increase with the factor 5.
I’m not even talking about the interest rates the same amount of the initial investment (10.000 euro) would get in a savings account and bring you a bit more than 12.000 euro at the end which would not even compensate for the inflation happened during the same period.
Now, you also know that with the ratios of 1:70 and above it would be more favorable to rather purchase silver than gold, as the ratios above 1:70 indicate that silver is undervalued compared to gold. You also got at hand some indications when to swap into which direction in order to maximize your earnings without even needing to invest more of your money into metals.
Opening your vault for precious metals via our reference link with our partner will allow you to secure at least 20% lifelong discount on agio (handling fees, when purchasing the metals. Our partner does not charge any handling fees when you sell the metals) and on storage fees. Depending on the total value of your vault, this discount can automatically adjust up to 45% (from the vault value of 250.000 CHF).
The advantages of opening a vault (or vaults) with our partner via the reference link of Singabiz are mentioned in more detail in our first article as well as in the Q&A article.
Having any questions, do not hesitate to contact us. Singabiz representatives and our partner will be glad to assist you as needed.
With it, Singabiz wishes you and your loved ones a happy, healthy, wealthy and successful New Year 2025!
