Gold and Silver Race Toward 2-Year Highs – How High?

Guest post from  James Cordelaine

Silver’s Going Crazy Too

Everyone knew gold would skyrocket in the aftermath of Brexit. As much as sophisticated investors and TV talking heads love to either ignore or pooh-pooh the precious metal when things are looking bright on the paper side, the minute the news goes sideways their rush to gold makes Black Friday at Walmart look like a Zen and peaceful still-life.

Two reserve currencies, the British pound and the euro, are suddenly looking like twin deer in the headlights of an economic Mack truck. The pound will be down for the count for the foreseeable future, since what we can see ahead looks pretty ugly. Experts are already predicting the demise of the euro, which from this side of the pond may look like no big deal. But 19 of the 28 still-remaining EU nations use this fiat currency, and according to the EU website that amounts to almost 340 million individual users a day. So an imperiled euro is serious business, both for a huge number of individuals and for markets worldwide.

And that was just round one.

Thus we shouldn’t be surprised that alongside gold another safe haven metal is busting out, and that’s silver. Silver actually offers double the bang for your investment buck, with its dual role as precious metal and highly sought-after industrial component.

Silver plays an essential function in a wide variety of industries like electronics, including the constantly exploding sector of consumer tech goods: phones, computers, tablets, flat screen TVs and more. It’s also vital to all the technology in your car. In addition, it’s both antibacterial and antimicrobial which, in a world of ever-bigger and more resistant bugs and viruses, makes it crucial in a variety of medical applications.

It’s also money, just like gold is money. And since Brexit investors want it bad. The good news is, even with its recent rise, silver still remains an affordable means of getting in on precious metals as the second, likely more long-lasting, surge of damaging Brexit aftershocks unfolds.

 

Thank you James Cordelaine

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How High Is “Sky-High” Silver?

By David Smith, Originally Published on Money Metals Exchange

Now that the precious metals’ five-year cyclical bear market is acting like it’s been replaced by a vibrant bull run in the opposite direction (up!), many analysts who chided the ongoing rise in the mining stocks and metals that started in December 2015 are begrudgingly changing their “outlook” so they don’t get left behind.

Some veterans are holding to long-stated targets, while others are raising them as Mr. Market gives us new information.

T2-Silver

 

4th of July, 2016 Silver Fireworks (Courtesy barchart.com)

Perhaps the prediction laying claim to the most fascinating “sneaks up and gets you” was uttered by Franco Nevada Mining Corp. (NYSE:FNV) Co-Founder Pierre Lassonde, when gold was still trading in the mid-three digit area. Asked for his long-range forecast, he replied, “I believe that gold will have 3 zeroes after the first number – I just don’t know what the first number will be.” (This year, he opined that $8,000 is a reasonable expectation.)

Jim Rickards – the CIA financial warfare advisor recently interviewed on a Money Metals Exchange podcast and whose thoughts I have frequently cited – makes a strong case for $10,000 gold, primarily due to a gold revaluation by the world’s central banks.

You might wonder why, if the price of silver is projected to rise so much, I am dwelling on the price of gold. The reason is the silver-gold ratio which computes at any given time the number of ounces of silver needed to buy an ounce of gold. During the last 50 years, this key ratio has risen from a 1979 low of 14:1, to a January, 1991 high of 100:1.T2-Rickards

Financial system insider
Jim Rickards sees $10,000 gold.

 

Currently about 67:1, it’s still relatively elevated (showing silver is relatively inexpensive) within its historical parameters.

Over the years, this key ratio has spent a great deal of time bracketed between 80:1 and 50:1. Considering this data, a $10,000 gold price would put silver priced between $125 – $200 an ounce.

At the apex of its last secular bull market in 1980, the silver-gold ratio weighed in at a hefty 14:1. If silver only got down to a 30:1 ratio, this would price our model at over $300/troy ounce. Leaving the ratio aside altogether and simply considering the 1980 inflation-adjusted price by itself would project a silver price today of more than $150 an ounce.

If you’d like a real heart-stopper (sit down first), then consider what John Williams at Shadowstats.com has demonstrated, using the government’s long-standing Consumer Price Inflation (CPI) calculation models (which have since been revised several times by the U.S. government to understate inflation). Williams calculates that the value of the “true” CPI-adjusted 1980 silver spike price high today, would be equivalent today to a silver price of… $470/ounce!

Most of our readers are familiar with many reasons the intermediate to long term bullish case for silver is exceptionally strong. Beyond these factors – not to mention the recent revision of silver supply data shows the poor man’s gold has actually spent more time in deficit than in surplus over the past decade and while the current silver-gold mining ratio is only 9:1 – comes another new and intriguing consideration…

Recently, First Majestic Silver (NYSE:AG) President Keith Neumeyer, made the following remark: We got approached by an electronics manufacturing company that manufacturers cell phones and computers about four weeks ago… There were three of them in the meeting and they wanted to bid on our silver… It’s the first time in the fourteen years that I’ve been with First Majestic that we’ve ever been contacted by an electronics manufacturer… That tells me there is something changing in the market.

Some Silver Price Projections by the Heavy Weights

Early this summer, Keith Neumeyer said that triple digit silver was in the cards, even if gold stays well below expectations. But if gold should go to $10,000, then “silver will be some ridiculous number… it could even be $1,000…”

Nick Laird: I find it interesting when Keith Neumeyer of First Majestic Silver, one of the largest silver producersNeumeyer, sticks his head out & says $140 silver, at the same time as Pierre Lassonde of Franco Nevada, one of the most successful gold entrepreneurs does the same in calling for $10,000 gold. Which would produce a 71:1 ratio which is a little below where we are today. At the top of the bull run, I would expect a ratio of perhaps 30:1 which means one of them needs to double his number.

First Majestic CEO expects triple digit silver prices.

James Turk: Silver is still in stage-1 of its bull market; the big price gains don’t start occurring until widespread participation by the public begins in stage-2, but that will not begin until silver breaks out of its base when $50 is eventually hurdled. With that event silver will start garnering worldwide attention just like gold started doing when gold entered stage 2 of its bull market by hurdling above $1000. (Turk has publicly stated he believes; we will eventually see $400 silver.)

Steve St. Angelo’s SRSRoccoReport.com chart below demonstrates how the massive multi-year upswing in American Silver Eagle sales is changing the landscape for investment demand – with a concomitant effect on supply. And keep this factoid in mind: though we don’t have a breakout handy for how much of the total demand is destined for other countries, we’ve been that informed that ASE’s are sold to at least 50 other countries. If this “foreign” Eagle demand-wave continues to build, sales of the iconic coin could shift into hyper-drive.

T2-Inv Demand

Holding silver will place you in good company with other Americans!

David Morgan (2002) of TheMorganreport.com: For the record, I will state there will be another, more frenzied scramble which will carry silver prices to highs that will repair all the excess paper money creation, price suppression, supply deficit, and bearish sentiment over the past two decades. This will become known as the Great Silver Crisis.

David doesn’t spend a lot of time guessing where the silver price will peak when this multi-year historic bull run starts to roll over, but neither is he shy about saying that “it will be one for the record books.”

And herein lies an important caveat for the rest of us. As precious metals insurance-holders and investors, we are better served by focusing more on the fact that silver is likely to go up a LOT, than by trying to divine by how much.

If we’re destined to see the very large and sustained up move I expect, then shrewd investors can achieve maximum gains by establishing a “silver stacking” program of regular dollar cost averaging, without paying too much attention to either the current price, or some distant projection. Leave the day-to-day predictions to the swing traders and crystal ball gazers, while methodically adding to your physical position. It’s a nice way to tame those pesky fear and greed investment dragons. Not to mention building over time, a good-sized pile of silver with the potential for gains that might just exceed your wildest imagination.

Steve St. Angelo’s chart above shows that Americans in greater numbers than ever are getting involved with the “silver story” by exchanging some of their paper promises for real, hold in your hand money: silver. If you’re new the topic, now’s a great time to get started. And if you’re already a stacker…well then just keep on keepin’ on!

David Smith is Senior Analyst for TheMorganReport.com and is a regular contributor to MoneyMetals.com. For the last 15 years, he has investigated precious metals mines and exploration sites in Argentina, Chile, Mexico, China, Canada, and the U.S. and shared his findings and investment wisdom with readers, radio listeners, and audiences at North American investment conferences.

2 thoughts on “Gold and Silver Race Toward 2-Year Highs – How High?

  1. The handwriting is on the wall. The EURO is on life support – no amount of blood can save it. It’s only a matter of time before it dies! The Banks of Europe are also in crises. Unpayable debt worldwide is the BLACK SWAN.
    Physical Gold & Silver will flourish. Stay calm, focused & resolute.
    Remember stress kills. Be prepared.


  2. Notice the US National Debt Clock; – where the total rises by $1,000,000 every 20 seconds! Effectively devaluing the US paper currency, and good reason to switch to solid gold and silver assets on their one-way ticket to the stratosphere!


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