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Is the Extreme High in the Gold/Silver Ratio Setting Up For an Extreme Reversal?

Scorpio

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#1
Is the Extreme High in the Gold/Silver Ratio Setting Up For an Extreme Reversal?
Jeff Clark




There are a few times in an investor’s life where, as Jim Rogers once put it, you see a pile of money sitting in a corner and you can go pick it up. In other words, an investment opportunity that’s not just obvious, but has a high reward-to-risk ratio.


It may not have been expected by many investors, but the gold/silver ratio (gold price divided by the silver price) has stretched to never-before-seen levels. It’s soared to not just a generational high, but a historic high. As in 5,000 years of history.


Does this extreme reading suggest there is a pile of money sitting in a corner that we can go pick up? At a minimum it suggests a highly compelling investment opportunity.


Let’s take a look at the ratio and see what message it might be sending…


Three Centuries of the Gold/Silver Ratio


To put the current gold/silver ratio into perspective, it’s useful to look at its long-term history. That can tell us where we sit today.


In various periods throughout history gold and silver prices have been fixed. Sometimes one or the other, sometimes both, occasionally neither. But this picture of the past 333 years puts a glaring spotlight on the extreme ratio we have today.




In all of recorded history, the gold/silver ratio has never registered a reading this high. The recent high of 123.5 was recorded on March 17, but it still remains highly elevated in historical context.


Let’s zoom in on the past few decades for a closer look. The following chart shows the modern day high and low, along with the current reading.




The prior record high was 100.8 in 1991. The new high is now 22.5% above that all-time high. In contrast, you can see that in 1980 it bottomed at 14.


The gold price has climbed in response to Covid-19 headlines, while silver has not. Gold ended the first quarter of 2020 up 5.6%, while silver fell 22.8%. In fact, it was silver’s worst quarter since 2013.


Perhaps this is not surprising: investors rushed to gold as fears of the black swan event spread, but since that event was deflationary they didn’t turn to silver. As much as 88% of silver is used in non-monetary applications—jewelry, industrial, silverware, religious objects, etc., implying demand would fall for those items in an economic pullback.


It may take inflation to reverse silver’s lagging performance and begin to outperform gold (and thus push the ratio down), or perhaps some other monetary event, but what we do know is that if the ratio did not reverse it would be the first time in history.


What might silver’s gains look like? Here’s an analysis of some of those prior reversals…


What a Declining Ratio Means for Silver Performance


You notice from the above charts that there are plenty of times where the gold/silver ratio soars and plenty of times where it drops. When it falls, silver is outperforming gold—that can be because it’s falling less than the gold price is falling, but it’s usually because it’s climbing more than gold.


Check out silver’s gains over gold in the four most recent declines in the ratio.




Silver outperformed gold anywhere from one to over four times. And that was with the ratio falling from 80 to 40 or 30. With the ratio now over 110, history suggests a snapback rally could be enormous, meaning silver’s outperformance of gold could easily be measured in hundreds of percent.


  • The gold/silver ratio may not be done climbing, but the value offered by silver, relative to gold, is hard to overstate.

History suggests that the extreme levels in the gold/silver ratio won’t last. And that the reversal, whenever it comes, could be breathtaking.


So, to answer our earlier question… Yes, you might even say that buying silver at this juncture is akin to seeing a pile of money sitting in the corner and walking over to pick it up.





One of the worst things an analyst can do is make a prediction that includes both a price and a date. Odds are you’ll end up with egg on your face.​
But one thing we can do is look at history. Today’s gold bull market won’t be identical to others in the past—but history does provide clues about how high the price might go based on prior trends.​
By my calculations, there have been five gold bull markets since it was legal to own again in 1975. Here are the percentage gains of each, plus how long they lasted.​


http://www.silverbearcafe.com/private/04.20/ratio.html
 

Voodoo

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#2
Yes, kinda how markets work. Wouldn't surprise me to see a 10:1 ratio or better.
 

Scorpio

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#5
What Is the Gold-Silver Ratio?

The gold-silver ratio, also known as the mint ratio, refers to the relative value of an ounce of silver to an equal weight of gold. Put simply, it is the quantity of silver in ounces needed to buy a single ounce of gold. Traders can use it to diversify the amount of precious metal they hold in their portfolio.1



Here's how it works. When gold trades at $500 per ounce and silver at $5, traders refer to a gold-silver ratio of 100:1. Similarly, if the price of gold is $1,000 per ounce and silver is trading at $20, the ratio is 50:1. Today, the ratio floats and can swing wildly. That's because gold and silver are valued daily by market forces, but this has not always been the case. The ratio has been permanently set at different times in history and in different places, by governments seeking monetary stability.


https://www.investopedia.com/articles/trading/09/gold-silver-ration.asp
 

Scorpio

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#6
The Gold-to-Silver Ratio: What is It and Why Does It Matter?



For experienced investors, the gold-to-silver ratio is one of many indicators used to determine the right (and wrong) time to buy or sell their precious metals.

Other factors – including economic uncertainty, inflation frenzy and debt – have encouraged millions to invest in gold and silver, and in the past few years, small-scale investors have begun to climb aboard.

Yet despite these market developments, to many, the gold-to-silver ratio remains a vague, elusive mystery.

So what IS the Gold-to-Silver Ratio and why does it even matter?

Good question. First, a simple definition: Basically, the gold-to-silver ratio is the amount of silver it takes to purchase one ounce of gold.

At the time this was written, the gold-to-silver ratio stood at approximately 50 to 1.

That means, at the current price, it would take 50 ounces of silver to buy 1 ounce of gold.

While there are countless websites providing the current ratio, it’s relatively painless to calculate on your own.

Simply take the price of gold, divide it by the price of silver and Voilà! You have the gold-to-silver ratio.

Here is an example using recent market prices:

$1644 (gold price) ÷ $31.60 (silver price) = approximately 52 (Gold-to-Silver Ratio)

Thanks for the information, but what does it really mean?

Investors who trade gold bullion, silver bullion and other precious metals scrutinize the gold-to-silver ratio as a signal for the right time to buy or sell a particular metal.

When the ratio is high, the general consensus is that silver is favored. This is because, relative to the ratio, silver is somewhat cheap.

Conversely, a low ratio tends to favor gold and may be a signal it’s a good time to buy the yellow metal. Many large-scale, experienced investors may trade their silver for gold as the ratio drops.

Unfortunately, because the gold-to-silver ratio fluctuates so wildly, it can be difficult for novice or small-scale investors to read the signals and make a profit.

Typically, the gold-to-silver ratio serves as an impetus for diversifying holdings (experienced investors agree that diversity is good). If one investment flops, alternate investments in your portfolio pick up the slack – or losses.

Historically, what did the Gold-to-Silver Ratio look like?

Since 1687 – as far back as the records reach – the gold-to-silver ratio vacillated between roughly 14 and 100. Around 1900, the ratio steadied, remaining relatively flat.

Indeed, prior to 1900, the gold-to-silver ratio hovered around 16. This was likely because many countries were using gold- and silver-backed currencies. For instance, France and the United States (among others) assigned statutory limits on what the ratio could be.

Also, the U.S. Geological Survey estimates that there’s 17.5 times more silver in the Earth’s crust than gold, which could provide another explanation for the pre-1900 gold-to-silver ratio average.

Throughout the twentieth century though, the gold-to-silver ratio has averaged about 47-50 and has fluctuated wildly at times

What does this mean for the future?

Some experts predict the gold-to-silver ratio will return to its long-term, pre-1900 average of 16 to 1. Many factors are cited in this favorable claim. It's worth noting however, among these experts are some of the most ardent advocates for silver investing.

In the end, in order for the ratio to return to its pre-1900 average, the price of silver would need to rise to approximately $105 per ounce. Likewise, if the ratio were to drop to its long-term average, silver prices would rise to about $61 per ounce.

The gold-to-silver ratio is indeed one of several valuable tools used to determine the optimum time to buy gold or silver bullion.

However, it is wise to avoid haste. Only the most experienced investors make profits using a short-term view, and even they suffer errors in judgment.

With patience, research and a long-term view, you may choose to buy silver when the ratio is high – buying higher quantities with fewer dollars.

Disclaimer: Information contained in this article is NOT to be considered investment advice. Do your own research and evaluate your individual situation before making investment decisions

https://www.providentmetals.com/kno...resources/gold-to-silver-ratio-explained.html
 

Scorpio

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#7
spinal,

it is not referencing dealer pricing, so not with premiums,

but as you suspect, it is based on 'current pricing'
if you use current cash price, how accurate is that?
if you use current front month futures, that would be a paper price.
etc.
 

spinalcracker

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#9
spinal,

it is not referencing dealer pricing, so not with premiums,

but as you suspect, it is based on 'current pricing'
if you use current cash price, how accurate is that?
if you use current front month futures, that would be a paper price.
etc.
I get it
it sounds like a baseline , a tool to use when trying to make an investment decision

otherwise it’s nothing but a bunch of numbers that Actuary minded people get off on
 

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#10
GSR 113.4 Generic Rounds 90.9 at $19.05 Silver Eagles 68.4 at $25.31

These are the rough ratios in the physical Silver market right now. Now add the premiums a dealer will trade you for and the ratio gets much lower. Playing the GSR is much harder than I thought. I guess I would have to play the paper market. The GSR would have to stabilize for awhile (6 months or more) to really get the most out of a trade of an ounce of gold for a lot of silver.
 

Wellsburg

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#11
I have been trading this ratio (physical), back and forth for about thirty years.
80 or higher, sell some gold and buy some silver. 50 or lower, sell some silver and buy some gold.

Never played with huge quantities, 2 to 5 ounces of gold or a few hundred ounces of silver per trade. Nickel and dime shit just for fun.
Sometimes I am trading sovereigns, Krugerrands, $20 Lib's., Maples, etc. Depends on what I have available.
Likewise with silver. Could be trading private mint bars or 90% coin.

During normal times, the trade with the local coin shop looked something like this:
I sell gold at or very near spot, and buy silver at spot plus 60 cents.
Or
I sell silver at spot minus 40 cents, and buy gold at spot plus $20.

The LCS picks up 5 to 7% on the trades and I am fine with this. He has overhead. I don't.
My pile has grown over many years with this method.

Right now, I would make the swap of a lifetime (gold for silver) except I CAN'T.
The shops are closed. Nobody has inventory. Silver premiums are sky high. It is simply not possible to make the trade.

I am so pissed, been waiting for a ratio like this my entire adult lifetime and the market is paralyzed.

The paper futures market is pure bullshit and folks like us that hold physical are continuously FUCKED by these paper pricks.
Truly hoping that the COMEX, LBMA, SLV, GLD, and the WALKING DEAD BIG BANKS all go tits up and every thief that works there commits suicide.

Do I sound pissed?
 

FthePolice

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#12
I have been trading this ratio (physical), back and forth for about thirty years.
80 or higher, sell some gold and buy some silver. 50 or lower, sell some silver and buy some gold.

Never played with huge quantities, 2 to 5 ounces of gold or a few hundred ounces of silver per trade. Nickel and dime shit just for fun.
Sometimes I am trading sovereigns, Krugerrands, $20 Lib's., Maples, etc. Depends on what I have available.
Likewise with silver. Could be trading private mint bars or 90% coin.

During normal times, the trade with the local coin shop looked something like this:
I sell gold at or very near spot, and buy silver at spot plus 60 cents.
Or
I sell silver at spot minus 40 cents, and buy gold at spot plus $20.

The LCS picks up 5 to 7% on the trades and I am fine with this. He has overhead. I don't.
My pile has grown over many years with this method.

Right now, I would make the swap of a lifetime (gold for silver) except I CAN'T.
The shops are closed. Nobody has inventory. Silver premiums are sky high. It is simply not possible to make the trade.

I am so pissed, been waiting for a ratio like this my entire adult lifetime and the market is paralyzed.

The paper futures market is pure bullshit and folks like us that hold physical are continuously FUCKED by these paper pricks.
Truly hoping that the COMEX, LBMA, SLV, GLD, and the WALKING DEAD BIG BANKS all go tits up and every thief that works there commits suicide.

Do I sound pissed?

I feel your pain. I've tried to make the trade when it was 120+ and couldn't. BS.
 

Irons

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#13
That's roughly the ratio of the stuff actually in the ground.
.
.
16 TO 1 is the minerals in the ground ratio that was tossed around back in the late 1800's when we actually had precious metal in our currency and congressmen/senators would argue about prices and ratios. There is a super rich historic Gold mine in California called the 16 to 1.

Buuuuut ratios pretty much go out the window when one of the metals isn't worth mining. The American west has thousands silver mines that are still full of silver but nobody's mining it. It isn't worth enough to pay for it's own extraction. Arizona, Nevada are still full of silver. Tombstones mines flooded they never ran out of ore.

Ever heard the old saying "It takes a Gold mine to operate a silver mine"? Silver has always been expensive to mine and in the majority of cases it ain't worth it.

:don't know:
 

the_shootist

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#14
16 TO 1 is the minerals in the ground ratio that was tossed around back in the late 1800's when we actually had precious metal in our currency and congressmen/senators would argue about prices and ratios. There is a super rich historic Gold mine in California called the 16 to 1.

Buuuuut ratios pretty much go out the window when one of the metals isn't worth mining. The American west has thousands silver mines that are still full of silver but nobody's mining it. It isn't worth enough to pay for it's own extraction. Arizona, Nevada are still full of silver. Tombstones mines flooded they never ran out of ore.

Ever heard the old saying "It takes a Gold mine to operate a silver mine"? Silver has always been expensive to mine and in the majority of cases it ain't worth it.

:don't know:
Which is why I always chuckle when I see another 'silver poised to go to the Moon' internet article posted here
 

Irons

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#15
Which is why I always chuckle when I see another 'silver poised to go to the Moon' internet article posted here
Most silver ore is silver sulfide, shallow horn silver is long gone as it was easy to get. In the old days if the miners had the money they would roast the ore at the mine site to release the silver from the sulfides before sending it to a mill. Toxic as hell and expensive to do. Or it can be crushed and cyanide leeched. Once again expensive and toxic.

Roasting is a process of heating of sulphide ore to a high temperature in presence of air. It is a step of the processing of certain ores. More specifically, roasting is a metallurgical process involving gas–solid reactions at elevated temperatures with the goal of purifying the metal component(s). Often before roasting, the ore has already been partially purified, e.g. by froth flotation. The concentrate is mixed with other materials to facilitate the process. The technology is useful but is also a serious source of air pollution.[1]

How do you extract silver from its ore?
Silver
is extracted from the ore-argentite (Ag2S). The process of extraction of silver is called as cyanide process as sodium cyanide solution is used. The ore is crushed, concentrated and then treated with sodium cyanide solution. This reaction forms sodium argento cyanide Na[Ag(CN)2].Jun 5, 2019

Not worth the trouble for a few bucks an ounce.

.
 
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Uglytruth

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#16
Ever think they can crash gold to tighten up the ratio?:ponder:
 

Irons

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#17
Ever think they can crash gold to tighten up the ratio?:ponder:
Nobody cares about silver or what it's worth. I scooped up a beautiful silver ring at the beach yesterday, I gave it to my buddy's toddler daughter.
She probably lost it already, so there goes a few cents.


.
 

andial

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#18
“A false balance is abomination to the Lord: but a just weight is his delight.”
Proverbs 11:1
 

stAGgering

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#19
138 to 1 here it COMES !
I would love the premiums to drop, and availability to return.
Then see the ULTIMATE ratio mentioned here.
I'd sell the stupid gold rings I metal detected, like that crazy ferrous metal guy worships...
I'd dig up my grandparents and steal their teeth !
Got a computer? No more. I stole it for the GOLD !

March 6th, 2020
If this really happens, sump-ting wong.
Ratio talk @ 10:15.

 

Irons

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#20
Hopium addiction is painful I hear......


.
 

andial

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#21
138 to 1 here it COMES !
I would love the premiums to drop, and availability to return.
Then see the ULTIMATE ratio mentioned here.
I'd sell the stupid gold rings I metal detected, like that crazy ferrous metal guy worships...
I'd dig up my grandparents and steal their teeth !
Got a computer? No more. I stole it for the GOLD !

March 6th, 2020
If this really happens, sump-ting wong.
Ratio talk @ 10:15.

You can't argue with those charts matching up '87 verses today. But the fed today verses the fed in those days are two different animals plus we might be facing a monetary reset plus the government debts compared now to then. Yes I hope he's wrong.
 

andial

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#22
Rejected silver they are called, for the Lord has rejected them.”
Acts 19:24
 

andial

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#23
138 to 1 here it COMES !
I would love the premiums to drop, and availability to return.
Then see the ULTIMATE ratio mentioned here.
I'd sell the stupid gold rings I metal detected, like that crazy ferrous metal guy worships...
I'd dig up my grandparents and steal their teeth !
Got a computer? No more. I stole it for the GOLD !

March 6th, 2020
If this really happens, sump-ting wong.
Ratio talk @ 10:15.

Just a thought stAG, maybe that 33 year chart pattern was in the cards before this whole virus crisis which is probably going to cause a money reset happened? Going forward from here is much different than going forward from 1987. Yes that chart is bugging me.
 

Uglytruth

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#25
Anyone know how much is reclaimed from industrial use?
 
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#27
Industrial demand for silver has fallen off a cliff. Global production for silver is also down significantly (mine shut downs). I suspect investor demand for silver is strong. But I suspect investor demand for gold is much stronger. I expect the G/S ratio will likely not move a whole lot as both silver and gold trend higher.
 

Voodoo

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#28
Just for some more perspective, metals expert Rob Kirby said today that the current rate of extraction around the world is 8 ounces of silver for every 1 ounce of gold.

8-1.

Just sayin'.
.
.
From everything I've seen and learned about markets I'm going to make a bold prediction. We might see threads around here where silver prices are challenging gold prices. Yep, 1:1 might actually be challenged. That would require just the perfect storm but I'm not going to rule it out.
 

Uglytruth

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#29
From everything I've seen and learned about markets I'm going to make a bold prediction. We might see threads around here where silver prices are challenging gold prices. Yep, 1:1 might actually be challenged. That would require just the perfect storm but I'm not going to rule it out.
Because............ ? No faith? Collapse?
 

ZZZZZ

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#30
From everything I've seen and learned about markets I'm going to make a bold prediction. We might see threads around here where silver prices are challenging gold prices. Yep, 1:1 might actually be challenged. That would require just the perfect storm but I'm not going to rule it out.
I hope you're wrong, because it would mean the world has literally gone to hell. But I'll be happy to be prepared for it and survive with my relative well-being intact.
.
.
 

stAGgering

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From everything I've seen and learned about markets I'm going to make a bold prediction. We might see threads around here where silver prices are challenging gold prices. Yep, 1:1 might actually be challenged. That would require just the perfect storm but I'm not going to rule it out.

This will ground your inclinations, as fantasying as they may be.
No worries, there are others with 1:1 imagination.

 

Uglytruth

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#32
Sounds like I'm going to have to cut my dimes into small pieces! :secret::winks2::thumbs up 2:
 

GOLDBRIX

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#33
Jim Rogers talking to India ( gets interesting for me good at 9:46 & 13:50 min. marks.):
 
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anywoundedduck

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#34
From everything I've seen and learned about markets I'm going to make a bold prediction. We might see threads around here where silver prices are challenging gold prices. Yep, 1:1 might actually be challenged. That would require just the perfect storm but I'm not going to rule it out.
I think you are right. Banks are hoarding gold, so the only refuge for Joe 6 pack is silver. Because of the tiny silver market, it wouldn't take much interest to send silver to the moon!
You hear that, Silver Sammy, to the moon!
 

GOLDBRIX

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#35
Many say "Silver is the poor man's gold".
Gold rises in panic situations. Silver reacts slower but its increase is more significant on its move up compared to gold.
 
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Voodoo

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#36
I mean perhaps we only get to 2:1 or 3:1 which will seem like a lot at the time, but from these levels it's hard to imagine. The fact is that silver has been ignored for many years and I dont see many reserves. It cant me mined alluvial like gold. And things tend to overshoot.
 
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Uglytruth

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#37
How are they going to make the mandatory solar panels for California if there is no more supply?
 

anywoundedduck

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#38
How are they going to make the mandatory solar panels for California if there is no more supply?
How will they roll out 5G?
At present, 5G deployment is still in its early stages, and as such, 5G-related silver demand currently constitutes approximately 7.5 million ounces (Moz). With the rollout of 5G in the coming years, however, silver’s role in the electronic applications used in 5G is forecast to rise significantly to approximately 16 Moz by 2025 and as much as 23 Moz by 2030, which would represent a 206 percent increase over today. For comparison purposes, in 2010, silver’s use in the once emerging photovoltaic industry was approximately 40 Moz, and by 2018 it stood at 80.5 Moz.
https://www.silverinstitute.org/silver-play-critical-role-5g-technologies/
 

RebelYell

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#40
Central banks and hedge funds buy gold but not silver. The little people buy neither in general.

Silver left out in the cold.
Yep. For 5,000 years silver was money. Now it ain't. So the ratio changed.

For a very long time gold was money too, and it was worth a lot. For a little while a lot of people forgot it was money and it got cheaper. Now some of those folks is remembering that gold is money again so it's getting more 'spensive.

If people remember silver is money it's going to be worth more. Otherwise it's just another metal.