While everybody was celebrating Independence Day, the real firework took place at the silver market. As you can see at the next chart, there was a short squeeze lifting the price of silver as high as $21.30 before settling down to consolidate. This means silver broke some very tough resistance only in a matter of days. When the $18 hurdle was taken, $19 and $20 were left behind like ludicrous mode in a Tesla. It wouldn’t be a surprise to see the price of silver consolidate around $20 a few days or weeks now. A little correction is quite normal.
What we’ve witnessed is only a second remarkable fact in history. Friday the first of July, the Optimism Index of SLV ended at 100. You can’t be more optimistic, 100 is the most. The first time this occurred was June 11 2007. In 2007 the price of silver saw a 6% correction in the following week. Normally when the Optimism Index is above 95, there is a 7 to 10 days correction. But the main question is … how high can silver go? To get a good impression, you have to look at the Gold/Silver ratio. As we mentioned before, silver is undervalued at a ratio 75:1 and overvalued at a ratio of 35:1. Over the last 40 odd years the average gold-silver ratio was roughly 54:1. The ratio started the year at 80:1 and nearly topped 85:1. Never in the history of gold and silver did the ratio stay above 80:1 for an extended period. Neither it did this time. In April it touched 70:1 for the first time to bounce back at 76:1. Now the Gold/Silver ratio is definitely going down. We can expect a new (temporary?) equilibrium between 60:1 and 50:1.
So now we’ll get you some number
When gold stays around $1,350, silver will rise to $22.50 to $27.00. When gold rises until $1,400, silver will rise to $23.00 to $28.00. This gives an average price of silver somewhere around $25.00. This is another 25% rise. Not bad when you know it ended 2015 around $13.50.
Silver mining shares
So when the real firework is with silver, there’s an exploding firework with silver mining shares. Most mining shares are only profitable above $20.00. This means the hole mining sector has become profitable in a matter of days. The best mining companies are break even around $17.00. The rise to $20.00 means they tripled their profits overnight. That’s a happy Independence Day. You just can’t imagine what profits and stock prices are going to do when the price of silver hits $25.00. You just have to be involved as an investor to experience this tremendous ride. > Read our Guide to Gold and be prepared!