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Someone said recently, “If you love gold then you absolutely have to love silver”. I disagree. [The current weakness in price action in silver, relative to gold]…decisively rejects the unrealistic expectations of many silver investors and analysts.
1. Silver is primarily an industrial commodity…[and, as such,] is quite sensitive to slowdowns in economic activity. There have been seven official recessions in the past fifty years. Silver’s price declined between 20-80% in every single one of them (see How Does Silver Perform During (and after) A Recession? You’ll Be VERY Surprised). Why would anyone expect it to be different this time?
2. Those who tell us silver is cheap relative to gold say that silver’s price is likely to rise higher, relative to gold, going forward but…there is no fundamental basis for any [such] expectations regarding price action of silver relative to gold. The fundamentals for each are different. You can read more about the gold-to-silver ratio in my article Gold-Silver Ratio: Debunking the Myth.
Not surprisingly, the technical side appears to reinforce the lack of fundamental support for higher silver prices.@A Financial Site For Sore Eyes & Inquisitive Minds
Below is a one year chart of silver prices (SLV – iShares Silver Trust ETF)…
As you can see, SLV has made consistently lower lows over the past seven months. Last month’s plunge of fourteen percent to a new seven-month low came after a similar percentage decline in stocks that was supposed to take silver to new highs – not new lows.
The silver market is only 1/10th the size of the gold market so it’s prone to crisis-driven upside explosions as money floods into it during periods of high inflation and, today, the stage is set for an explosion in inflation. I expect it to kick off a crisis-driven mania into silver like what happened in 1980 and, adjusted for today’s prices, that means silver soaring above $160 a [troy] ounce.
There is a massive amount of energy underlying the silver market, and when it is ready to unleash, we will see price/value increases that will stun even the most ardent silver bugs…The real power of this expected move is likely to be released only some time after the price of silver has surpassed the $50/ozt. level. [Let me explain.] Words: 685
Editor’s Note: The original article by Kelsey Williams has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.