Tuesday, July 31, 2012

Thinking About Olympic Gold Medals

With the Olympics on every television this week you would think I would be concerned with the number of medals my home country of USA has taken home so far this year. Not a chance. I spend my time gazing at the actual "metals" wondering how much the precious coins are worth that hang around the winner's necks.

It turns out that an Olympic gold metal is actual composed of 93% silver, 6% copper, and only 1% gold.

Bummer for the competitors right? Yes, well it is today if they were to take it to a coin shop to sell. However, a market historian might let an Olympic gold medalist know that there is over 2 billion ounces of available gold on the planet. How much available silver is there? Only 1 billion ounces, or 50% less.

That means based on pure supply silver should be worth 2x the value of gold. Will it get there at some point during the mania phase of the precious metals bull market run? That may be a stretch, but you can comfortably say that silver is extremely undervalued today.

Bloomberg discusses:

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