…Over the past 50 years prices for stocks, silver and gold…have increased exponentially…[and should] continue. [Given that] the price of silver, as indicated by the ratio to the DJIA, is near a multi-decade low, expect it to rally substantially…[between now and] 2020. $50 silver is coming, probably fairly soon. $100 silver will take longer.
Over 50 years the Dow Jones Industrial Average has averaged about 700 times larger than the price of silver. Examine the log-scale graph (below) of 700 times the price of silver plus the DJIA.
- Prices have moved higher exponentially.
- You can see the silver bubble in 1980.
- You can see the small deviation from trend in 2011 caused by the silver rally to nearly $50. It was not a bubble.
- Another silver bubble will probably occur, but we have not seen a bubble in silver since 1980.
What about the DJIA? Below is the 28 year chart of the DJIA – log scale.
- The DJIA has moved exponentially higher for three decades.
- The red ovals indicate “danger zones” where the DJIA rallied too far and too fast, corrected below its exponential trend-line, and then fell by 40% or more.
- The DJIA peaked in May 2015 and has only fallen slightly since then. Expect a larger correction.
Examine the silver (times 700) to DJIA ratio over the past 30 years. This excludes the 1980 bubble in which the ratio peaked many times higher than the 2011 ratio.
- The 30 year ratio shows long term trends of investor preference for paper assets, such as the DJIA, versus hard assets such as silver.
- Silver prices and the ratio hit a multi-decade low in November 2001, as indicated by a green oval.
- The ratio is only slightly higher in 2016, as indicated by the other green oval.
- There is considerable room for the ratio to increase, which would probably involve a somewhat lower DJIA and a much higher price of silver.
- The DJIA reached a high in May 2015. The next major move is likely much lower, similar to the 2001 and 2008 corrections.
- The price of silver, as indicated by the ratio to the DJIA, is near a multi-decade low. Expect the price of silver to rally substantially in 2016 – 2020. $50 silver is coming, probably fairly soon. $100 silver will take longer…
Disclosure: The original article, written by Gary Christenson (DeviantInvestor.com), was edited ([ ]) and abridged (…) by the editorial team at munKNEE.com (Your Key to Making Money!) to provide you with a fast and easy read.
“Follow the munKNEE” on Facebook, on Twitter or via our FREE bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner)
Related Articles from the munKNEE Vault:
You have been warned! The financial world is descending into the trap of exponentially increasing debt that leads, slowly or rapidly, toward an abyss of monetary madness that can only mean much higher gold and silver prices in the future.
The gold to silver ratio has been used for years to indicate buy and sell zones in both gold and silver. Here’s why and what the current major high of 80:1 means for the future price of silver.
The global financial system is increasingly unstable and fragile, even more so than in 2008. The important question these days is: How will governments, central banks and financial systems respond to the ongoing crisis? Future prices for silver are dependent upon the answer to that question. I suggest three possible scenarios.
Gold is in a hurry and is unlikely to wait for investors to acquire it at anywhere near these prices. We could now see a quick move to $1,400 and if gold doesn’t stay too long at that level, the acceleration is likely to continue towards the previous high of $1,900 and go even as high as $2,000/ozt. That being said, silver will move twice as fast as gold and could well reach $50 in 2016. Here’s why.
If you’re a speculator in precious metals, now may be a good time to consider trading in some gold for silver. Here’s why.