Yesterday we talked about the price of silver in the short run. Looking at the Gold/Silver ratio, we found an average price of silver in the short run around $25.00, that’s another 25% to go. But how high can silver go in the long run? There are a few ways to calculate a possible price of silver, but in the end, the result is the same: the price of silver has a lot more room to rise. And when we say ‘a lot’, we really mean ‘A LOT!’. First we’ll look at the Dow/Gold ratio. When we know how high gold can rise, we can calculate the price of silver with the Gold/Silver ratio. We think we’ll see a Dow/Gold ratio of 1 at the end of this secular trend. During times of stagnation, slow economic growth in combination with inflation, stocks tend to move sideways within a 40% range. This means in the worst case scenario, the Dow Jones could fall to 10.000 points.
So with a Dow/Gold ratio of 1, this means gold could rise to $10,000 or times 7.5 from the current $1,370.
When you think this is nuts, look at the ’70 when gold rose 8-fold. It’s not impossible.
Dow vs Gold vs Silver
Yesterday we talked about the Gold/Silver ratio. It took 80:1 in a big way and now it’s headed to 60:1 – 50:1. But in 2011 the G/S ratio nose dived to 30:1. Centuries ago mankind calculated a ratio between gold and silver coins of 16:1. And now only 10 ounces of silver is mined for each ounce of gold, that’s a 10:1 ratio. So assuming a 30:1 ratio at a $10.000 gold price, that’s a price of silver of $333. A 10:1 ratio equals a price of silver of $1,000.
But possibly that’s not even enough
Hubert Moolman says people underestimate the price movements in silver. That’s what they did the last 5 years when nobody thought silver could fall to $13. And now investors are going to miss the big picture again. You can read the story here, but we’ll give you the clue. “On the chart, I have marked two fractals (1 to 4), to show how the period from 1921 to 1941 is similar to 1980 to 2016, for the silver market. The two fractals exist in similar conditions relative to interest rate (yearly) peaks and bottoms, as well the Dow/Gold ratio peaks.” The big picture is the cup and handle pattern. Based on the standard movement of this pattern, the handle will have the same movement as the cup. What does this mean? The movement from the bottom of the cup in 1932, was from $0.28 to $50 in 1980 (the chart is a little distorted since it shows a lower top in 1980). This is a 178.57 (50/0.28) fold increase. Therefore, the target for this larger pattern would be a similar move from the $50 level. So, that would be $50 x 178.57 = $8 928. The truth is probably somewhere in the middle, but you can see the price of silver is just getting warmed up, it still has A LOT more room to run in the coming years. Don’t miss out of the huge potential that these silver stocks are offering at this moment. Don’t wait for these stocks to start yielding exceptional returns, but start buying the ‘best of breed’ in this sector.
Check out our Offer!