Many analysts predict a parabolic rise in the price of gold over the next 5 years and, as such, it is realistic to expect that silver will also escalate dramatically in price – but by how much? This article applies the various historical silver to gold ratios to come up with a range of prices based on specific price levels for gold being reached.
The Silver:Gold Ratio
How both gold and silver perform, in and of themselves, does not tell the complete picture. More important is the price relationship – the correlation – of one to the other over time, the silver:gold ratio:
- the historical movement of silver is 90 – 98% correlated with gold,
- silver is currently greatly undervalued relative to its average long-term historical relationship with gold with a current silver:gold ratio of 74:1 and
- many analysts predict a parabolic rise in the price of gold over the next 5 years (here are 42 specific price forecasts for that period).
As such, it is realistic to expect that silver will also escalate dramatically in price (here are 14 specific price forecasts for that period) and most likely even more so than that of gold (see here and here for why that could well be the case).
Let’s look at the silver:gold ratio from several different perspectives:
- since 1985 the mean ratio has been 45.7:1
- during the build-up to the parabolic blow-off in 1979/80 the ratio dropped from 38:1 in January 1979 to 14:1 at the parabolic peak for both metals in January, 1980.
Silver’s Potential Price Range With Gold At $1,200
First let’s use the price of $1,200 for gold and apply the silver:gold ratios mentioned above in approximate terms and see what they do for the potential % increase in, and price of, silver.
- Gold @ $1,200 using the 45:1 ratio puts silver at $26.67
- Gold @ $1,200 using the 14:1 ratio puts silver at $85.71
Now let’s apply the projected potential parabolic peaks of $2,000, $3,000, $5,000 and $10,000 to the various silver:gold ratios and see what they suggest is the parabolic top for silver.
Silver’s Potential Price Range With Gold At $2,000
- Gold @ $2,000 using the ratio of 45:1 puts silver at $44.44
- Gold @ $2,000 using the ratio of 14:1 puts silver at $142.85
Silver’s Potential Price Range With Gold At $3,000
- Gold @ $3,000 using the ratio of 45:1 puts silver at $66.67
- Gold @ $3,000 using the ratio of 14:1 puts silver at $ 214.29
Silver’s Potential Price Range With Gold at $5,000
- Gold @ $5,000 using the gold:silver ratio of 45.1 puts silver at $111.11
- Gold @ $5,000 using the ratio of 14:1 puts silver at $357.14
Silver’s Potential Price Range With Gold at $10,000
- Gold @ $10,000 using the gold:silver ratio of 45:1 puts silver at $222.22
- Gold @ $10,000 using the ratio of 14:1 puts silver at $714.29
It would appear that, any way we look at it, physical silver is currently undervalued compared to gold bullion and is in position to generate substantially greater returns in the future than investing in gold bullion.
Finding this article informative? Then “Follow the munKNEE” on Twitter and Facebook for a link to every new article as posted – and don’t forget to “follow” or “like” the articles while you’re there so your friends can become informed as well. They’ll appreciate it.
Related Articles from the munKNEE Vault:
Over the years only 42 pundits have been bold enough to provide a specific date as to when their forecast for the future price of gold (and silver, in some cases) would be realized. This article provides that information along with the criteria & rationale for their determinations. Read More »
Few pundits who have forecast the future price of silver have provided a specific date as to when their projections will most likely be achieved and why. This article provides that information. Read More »
You have no doubt read countless articles on the price of gold costing x dollars per “troy ounce” or perhaps just x dollars per “ounce” but the difference between the two measurements is significant. For that matter, what’s the difference between a 24 karat gold ring and an 18 karat gold ring? Let me explain. Read More »
Should you buy & hold your gold or silver or switch back and forth depending on the gold/silver ratio? This article examines 3 scenarios and identifies certain rules that should be followed to make the most of the ups and downs of the gold/silver ratio to substantially increase your holdings over time. Read More »
I believe that the Silver to Gold Ratio has peaked, making silver a compelling bargain relative to gold. From today’s vantage point it is difficult believing that the price of silver could ever equal or exceed the price of gold but, when one considers the possibilities, there are many good reasons to accumulate as much silver as possible at today’s prices. Read More »
The continuing upward trend in the gold/silver ratio (continuing weakness in silver relative to gold) is not in conflict with the view that gold commenced a cyclical bull market last December and is working its way through a lengthy basing process. Here are the details: Read More »
Analysing the long-term relationships of gold with other assets suggests that, in most instances, physical gold and silver and the shares of the companies that mine those precious metals have major upside potential – to somewhere between $3,000 and $10,400 per ounce for gold, between $75 and $650 per ounce for silver and in excess of $250 per barrel for crude oil – in the years to come. Words: 1132 Read More »
While it is never too late to buy gold one look at the current gold:silver ratio clearly suggests that silver and/or the stocks and warrants of quality gold and silver miners and royalty companies are a MUCH better buy at their current prices than buying gold. Read More »
We are at the beginning of a major shift out of paper assets into real assets and the more I studied the merits of owning gold and silver the more I realized that silver was the smart decision. Let me explain. Read More »
The price of silver is going to go much, much higher – much higher – over the next decade relative to gold. Below are 5 solid reasons why I believe that is the case. Read More »
I expect that silver will rally well over $100 in the next few years because most, if not all of the “favorable”, and few or none of the “unfavorable” items listed in this article, will occur. Read More »
With the likes of Ray Dalio and billionaire George Soros placing big bets on a recovery in precious metals now is likely the time for investors to take the plunge. The key question remains, however, which precious metal? My preference is silver. Here’s why. Read More »
It’s true that there are “NO SURE THINGS” in life…but an investment in SILVER comes DARN CLOSE! Yes, you’ll have to ride the tidal wave of price manipulation but when the waves die down you will fully appreciate the power and value of SILVER. Let me explain.
Silver has given returns of 584% in the last ten years and this article discusses the reasons for believing that silver can produce another decade of over 500% returns.
Silver is selling at less than half its 2011 high. It is being ignored more than gold. It has explosive fundamentals. This article assesses silver’s potential by looking at the big-picture forces that could impact silver over the next several years – and point to a possible runaway price scenario. Read More »
The price of silver has been corroding for much of the past year but a variety of signals in recent months suggest that it may not be long before silver begins to shine once again. [This article identifies 5 such signals and/or reasons why that may well be the case.]
I believe that silver could go to $60 per troy ounce by the end of 2014….I also believe silver will be the best single investment of this decade. The following article is focused on why I think you should seriously consider having a significant percentage of your investment portfolio in silver.
The price of silver is going to go much, much higher – much higher – over the next decade [relative to gold according to Jim Rogers and I concur. Below are 5 solid reasons why I believe that is the case.]
Silver has a reputation for being gold’s less desirable sister, but make no mistake, silver may still be a golden opportunity to invest in. Silver’s use is already very prevalent in the photography, consumer electronics, medical, and high tech industries and a major consumer of silver in the future will be the green technology sector in products such as solar cells and batteries. Read More »
The current availability ratio of physical silver to gold for investment purposes is approximately 3:1. So, why is it that investors are allocating their dollars to silver at a much higher ratio? What is it that these “smart” investors understand? Let’s have a look at the numbers and see if it’s time for investors to do as a wise man once said and “follow the money.”