The majority of analysts maintain that gold will reach a parabolic peak price somewhere in excess of $5,000 per troy ounce in the next few years. Given the fact that:
the historical movement of silver is 90 – 98% correlated with that of gold and that
silver is currently greatly undervalued relative to its average long-term historical relationship with gold
and it is realistic to expect that silver will eventually escalate dramatically in price. How much? This article applies the historical gold:silver ratios to come up with a range of prices based on specific price levels for gold being reached. Words: 691
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 gold:silver ratio.
Let’s look at the gold:silver 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 13.99:1 at the parabolic peak for both metals in January, 1980.
Let’s now look at the various price levels for gold and the various gold:silver ratios mentioned above, one by one, and see what conclusions we can draw.
First let’s use the price of $1,300 for gold and apply the gold:silver ratios mentioned above in approximate terms and see what they do for the potential % increase in, and price of, silver.
Gold @ $1,300 using the 45:1 ratio puts silver at $28.89
Gold @ $1,300 using the 13.99:1 ratio puts silver at $92.92
Now let’s apply the projected potential parabolic peaks of $2,000, $3,000, $5,000 and $10,000 to the various gold:silver 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 than investing in gold bullion.
History will look back at the artificially high gold:silver ratio of the past century as an anomaly caused by the world being deceived into believing that fiat currencies are real money, when in fact they are all an illusion.
This fiat currency experiment will end badly in a currency crisis and when that happens, as it surely will, gold will go parabolic and silver along with it – but even more so – as the gold:silver ratio adjusts itself to more historical correlations
The breakdown after the QE4 announcement, and now the extreme move into a yearly cycle low has, I daresay, convinced everyone that the gold bull is over. I would argue that it is impossible for the gold bull to be over as long as central banks around the world continue to debase their currencies [and that] gold is just creating the conditions – a T-1 pattern – necessary for its next leg up to what I expect to be…around $3200 sometime in late 2014 or early 2015. [Let me explain.] Words: 560; Charts: 3
Bubbles tend to follow the 80/20 ratio indicated in the Pareto Principle where approximately 80% of the price move occurs in the LAST 20% of the time. That being the case it would appear that gold and silver could conceivably top out around $9,000 per troy ounce and $250/ozt respectively .This is not a prediction of future prices of gold and silver; it is an indication of what could happen in a speculative bubble environment based on the history of previous bubbles. Words: 1280; Charts: 1