Silver appears undervalued as gold-silver ratio reaches 1:70

CEO Bae Jae-han told KB Real Estate TV that silver is significantly undervalued after the gold-silver ratio widened to 1:70, compared to recent trends of 1:40 to 1:50. He recommended using dollar cost averaging to mitigate the risks of predicting price bottoms.

As trends in the real estate market shift, the importance of investing in gold and silver for asset preservation is resurfacing. With gold prices surging recently and emerging as a core component of asset portfolios, investment strategies utilizing the "Gold-Silver Ratio"—which represents the relative value of gold to silver—are drawing attention.

In an interview with KB Real Estate TV, CEO Bae Jae-han explained the current price relationship between gold and silver, highlighting the investment value of silver. According to Bae, the current Gold-Silver Ratio has widened to a level of 1 to 70. Compared to historical periods when the ratio was between 1:12 and 1:15, or recent trends where it formed around 1:40 to 1:50, he analyzed that silver is relatively significantly undervalued. In other words, since the amount of money required to buy 1kg of gold can now buy 70 units of silver, he explained that it is a time worth showing interest in silver investment.

However, Bae emphasized "DCA, Dollar Cost Averaging" as a fundamental rule when investing in both gold and silver. He advised that it is risky to inject funds all at once based on the conviction that a specific point is the bottom, and that increasing the probability of success comes from buying small amounts whenever funds become available. He added, "Since it is impossible to predict when prices will drop, it is important to buy slowly in installments from the beginning."

Gold ETFs vs. Physical Gold: Divided by 'Taxes' and 'Psychology'

Methods for investing in gold are largely divided into ETFs (Exchange Traded Funds) and physical assets (gold bars). These two methods show distinct differences not only in returns but also in terms of taxation and investment psychology. In the case of domestically listed gold ETFs, a 15.4% interest income tax or dividend income tax is levied on trading profits, and if profits are large, they may be subject to the global financial income tax. This can act as a significant tax burden for investors with large asset scales. For example, if an investor manages 2 billion won in assets through an ETF and generates 2 billion won in profit, a massive global taxation issue could arise, necessitating caution when managing large funds.

On the other hand, physical gold has the strong advantage of being currently exempt from capital gains tax under tax laws. Bae explained, "When managing large funds, physical gold may be more advantageous than gold accounts or ETFs." While trading through the KRX Gold Market is also possible, watching real-time price fluctuations on a screen makes it easy to make psychological mistakes, such as selling at a low point or chasing a purchase at a high point. In contrast, physical gold kept in a safe provides psychological stability suitable for long-term holding as a "last line of defense."

There are various ways to store physical gold. Methods include using a large safe at home or using slightly smaller safes. Bae mentioned that in extreme cases, there are instances of storing it in kimchi containers or burying it in a garden. Additionally, people utilize bank safety deposit boxes or professional storage companies. Bae stated, "It is good to diversify asset storage in preparation for the worst-case scenario," noting that depending on an individual's asset scale and inclination, directly owning physical assets can be a way to increase asset safety.

Gold Bar Selection Criteria: Check 'Content' and 'Credibility'

When purchasing physical gold, one must verify the credibility and purity of the product. Gold bars issued by the Korea Minting and Security Printing Corporation are considered the most stable choice, possessing the credibility of a national institution. In particular, products applying a "latent image effect," where patterns are visible depending on the angle on the back of the product, help prevent forgery and alteration. The video explained that products showing this latent image effect are manufactured with great effort to prevent forgery and alteration.

The key to determining gold quality is the content. According to the Korean Industrial Standard (KSD 9537), the name "gold bar" can only be used when the gold content is 99.99% or higher. If the content does not meet this standard, it is classified as an alloy, which carries the risk of not being recognized for its true value when sold later. Therefore, it is essential to check the purity (99.9% or higher) upon purchase. Bae emphasized, "You must buy good gold to have its value recognized when you sell it."

Investment units can also be chosen flexibly depending on the individual's capital scale. While high-net-worth individuals prefer large gold bars in 1kg units, ordinary office workers or small-scale investors can practice DCA through smaller weight products in 100g units or "don" (3.75g) units. Recently, ultra-small products in 0.1g units have also been distributed, making it possible to invest by accumulating gold bit by bit like a bank deposit. For silver, there are ways to accumulate using 100g silver bars or the "Granule" method, which has a lower labor cost.

Bae emphasized the characteristics of physical assets whose value increases over time, stating, "Wearing jewelry made of 14K or 18K alloys during one's youth is also a method, but if you value asset value, it is advantageous to choose 24K pure gold products." He explained the holding value of physical assets by mentioning a case where a ten-don weight gold necklace purchased in the past showed a significant increase in value over time.

Source: original video (YouTube)