Tuesday , 16 September 2014

Gold:Silver Ratio Suggests Much Higher Future Price for Silver – MUCH Higher!

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

So says Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, www.munKNEE.com and the Market Intelligence Report newsletter (It’s free – sign up here). You can also “Follow the munKNEE” daily posts on Twitter or Facebook. Please note that this complete paragraph, and a link back to the original article*, must be included in any article posting or re-posting to avoid copyright infringement.

Gold to Silver 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 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.

For a fully interactive version of the gold:silver ratio over the years showing key moving averages as well as the dates and levels of points on the chart click on www.macrotrends.org/1441/gold-to-silver-ratio-historical-chart.

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.

Stay connected!

Gold to Silver Ratio Conclusion

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

Related Articles:

1. Coming Move In Gold Will See It Reach $3,200 by Late 2014 or Early 2015

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

2. Past Bubble Movements Suggests a Parabolic Peak Price of $9,000 for Gold & $250 for Silver Is NOT Unreasonable – Take a Look

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

3. Silver Projected to Reach $100/ozt. As Soon As Late 2015! Here’s My Rationale

4 comments

  1. Great refresher article from a little over a year ago, and my comments posted then seem to still make sense:

    RE: 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

    Today 05/09/14, Gold is $1287 and Silver is $19.15, which tells me that not only is Golds value being depressed but Silver’s value is being even more suppressed!

    Therefore it is logical that when both “recover” as the value of the US$ declines against other currencies, both Gold and Silver will rapidly return to the values mentioned in the above article, especially if the rest of the World decides to begin to not put all its money into US$ as they are now doing by trading with each other in other currencies than the US$.

  2. One question I have that you may be able to answer is this:

    Is either Gold or Silver subjected to “naked shorting” more than the other and if so which has been affected to a greater extent?

    If as I expect, Gold has been “manipulated” far greater by “naked shorting”, then perhaps this is yet another reason why investors will begin to add ever more Silver to their holdings, which will increase both Silver’s demand and value!

  3. Remember the Lone Ranger used to say as he galloped into the sunset:

    “Hi Oh Silver, and Away…”

    As I’ve posted before, I believe that Silver may be the better choice in the near future because of the buzz around wearing, owning and trading Gold… For many it attracts far too much attention, especially from the Gov’t.

  4. Salute for a GREAT article which I believe will change the thinking of many PM investors!
    +
    Also not mentioned above is the fact that if owning Gold is suddenly made illegal again, which has happened in the past in the USA, chances are that owning Silver will not be made illegal at the same time giving investors a bit of breathing room to “plan ahead”…