Silver Outlook

Lucy Stern asked about my outlook for Silver. She knows I’m bullish on Gold. Bill H. at Le Metropole Cafe, (by subscription only, but there is a two-week free trial available), wrote this about Silver:

First, Silver is trading at a historically very low level versus Gold, ie. it takes about 75 ounces of silver to purchase 1 ounce of Gold. When the Constitution was penned, our founders wrote about a 15-1 ratio. Obviously many things have changed in 200 plus years, but since then the ratio has traded between less than 10 and more than 85. For many, many years the ratio traded at 15 to 1 and 30. Even at 30 to 1, Silver will outperform Gold by a better than 2 to 1 margin.

Another plus for Silver is that there are very few “pure Silver mines” in operation today, the bulk of Silver production comes as a byproduct of other industrial metals such as zinc, lead, and copper. I am not a rocket scientist but I do suspect it will be years before the industrial complex rights itself and demand for these base metals regains a strong footing again. The point here is this, Silver supply should begin to decrease because demand for the base metals has dried up and production has slowed, thus less Silver will be produced as a byproduct.

Silver is about $12 and Gold is about $900, that’s a 75:1 ratio. IMO, Gold will go to $1,200. If Silver trades at 30 ounces to one ounce of Gold, Silver would be priced at $40. That’s a darn good gain!

Full disclosure: I own both Silver and Gold coins, and Gold and Silver mining shares, along with gold mutual funds.

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