this is from an interview sean rakhimov gave the gold report:

TGR: How are you viewing silver now compared to gold? I believe the ratio is now very large between the two. Over the next few years, would you expect silver to perform better than gold or just continue to mirror it?

SR: I am absolutely convinced that during this cycle we will see the gold-to-silver ratio in the 20 range, which means silver would outperform gold by at least by a wide margin. Silver is poor man's gold, more widely used and available in smaller denominations. Hence the overall demand for silver will be higher. This has been well demonstrated in the recent shortages of retail investment products in gold and silver that resulted in high premiums as compared to large bars that traded at spot price.

TGR: Many individuals are saying gold and silver are great for insurance policies, but real investments should be made in the mining companies.

SR: I have two different opinions on that. On the one hand, I agree that generally and historically mining shares did outperform the metals, at least the most successful ones, three to one. On the other hand the metals usually outperform their respective indices. This is a very important to understand: the best gold stocks will do better than gold itself and will be excellent investments. But there is no way for everyone to own only the best stocks and avoid the losers, someone will end up owning the losers and there will be a lot of more of those than winners. This was easily observed in the last tech boom, which gave us spectacular winners such as Oracle, Cisco and others. But there were scores of losers that didn't survive and many people, including yours truly, lost money in those.

If you feel that you can pick the winners, by all means buy resource stocks. On the flip side, if you are not sure, then stick with the physical or at least take care of the physical first.

The last couple of years have been a testament to that approach that myself and some others, like David Morgan, have been the proponents of for the longest time. I can give you an example. My stock portfolio is down over 50%; my physical portfolio is up. And there will be other times like these that will test your convictions and your patience. I have pretty strong convictions about the metals and the economy and currencies and the way things going to play out, so this type of environment does not necessarily scare me. It is very unpleasant and trying, but I don’t see any alternative. If you have a better plan of how to navigate these waters, I am listening.

http://seekingalpha.com/article/1328...