Since the beginning of 2008, silver spot prices have mushroomed from $14.86 to as high as $21.35 an ounce.
That's an impressive 44% increase, and over twice gold's 20% year-to-date gain.
And there's still significant upside!
Global silver demand is expected to greatly exceed supplies this year, despite an expected surge in mine production and lower fabrication demand. Much of the bidding will come in the form of investor demand, as speculators ramp up buying the monochromatic metal this year as an additional hedge against inflation and the falling US dollar through physical and ETF investment.
The deterioration of silver's supply/demand fundamentals to be the driving factor for prices in 2008 and beyond.
How high will silver prices go by the end of this bull cycle?
Of course, I've heard the über-bullish predictions of silver prices reaching $400 an ounce, $500 an ounce, and even $871.38 an ounce.
And while I can appreciate the excitement and zeal that the fellows making these incredible divinations have for gold's closest relative, I just don't believe that there's any chance of silver prices increasing to those levels in the foreseeable future.
However, if we consider the average gold/silver price ratio, and the inflation-adjusted price highs during the last metals bull market as meaningful tools to help determine the top for silver this time around, we see that silver prices have a good chance of reaching over $50 an ounce, and could even soar over $150.
That's a 250% to 650% increase from current levels!
The gold/silver price ratio is essentially the number of silver ounces required to buy one ounce of gold at current spot prices.
For example, if gold is trading at $1,000 an ounce and silver is trading at $20 an ounce, the gold/silver price ratio would be 50:1, or 1/50th of 1,000. To calculate the gold/silver price ratio, you need only to divide the current price of gold by the current price of silver.
This ratio has fallen significantly since the beginning of the current metals bull market and even more so since the early 1990s.
In the chart below you'll see a near two-decade decline in the gold/silver ratio, from 100:1 in 1990 to about 50:1 today, which is also the average ratio over the past forty years.
The "historic" gold/silver ratio, which has actually been traced back to as far as 4,500 years ago, is officially 16:1.
This 16:1 ratio has determined gold and silver's price relationship for thousands of years. In fact, if I had a chart that was ten feet long and represented the past 2,000 years of human history, the gold/silver ratio would remain under 16:1 for all but the last 7.5 inches.
For the year, the gold/silver ratio has fallen dramatically, reflecting silver's outperformance of gold. Since the beginning of 2008 the gold/silver ratio has dropped nearly 12% and, as I just mentioned, with silver prices at ~$20 an ounce and gold at ~$1,000, the gold/silver ration is approximately 50:1.
Now if we assume that gold will at least match its inflation-adjusted price high of $2,500 an ounce during the metals bull market of the 1970s and that the gold/silver ratio will remain steady at 50:1, we can estimate that silver prices will touch at least $50 an ounce, or 1/50th of $2,500 gold.
So this is an easy 175% gain from current prices.
Now let's assume that the gold/silver price ratio will drop to its historic level of 16:1 during the mania stage of the bull market. With gold at $2,500 an ounce, a 16:1 gold/silver ratio would put silver prices at $156.25 an ounce, a whopping 650% increase.
There's no doubt that silver is a long way from the $150 level. And, yes, a 650% gain from current silver prices may seem a little far-fetched considering the wild ride upward we already been on over the past few years. But before you count out silver at $150 an ounce, you must also consider that this figure is very close to the inflation-adjusted high for silver of $146 an ounce.
Also you have to consider that these figures are based only on gold reaching its inflation-adjusted high of $2,500 gold. There are many analysts out there right now, including myself, who believe that gold could test the $3,000 level once this bull market plays itself out.
Of course, everyone has their own opinion on how high gold will go. With that in mind I created a table (below) that shows silver prices based on several gold/silver ratio scenarios and their relationship to the price of gold.
Of course, without a working crystal ball I cannot say with absolute certainty where silver prices will top off. But I feel extremely confident telling you that we can only expect higher prices as the current commodities bull market continues to mature.
So how can you profit from this?
Well, I just told you. Buy a bunch of silver now, and sell to take profits as market prices rise. It's pretty much like shooting fish in a barrel at this point. And you're almost guaranteed profits considering inflation-adjusted price highs. You'll make money. But unless you're buying and selling tonnes of bullion you probably won't make millions of dollars. Maybe hundreds of thousands. But probably not millions.
The real money to be made in this market is in equities.
More specifically, the investors who'll make the millions of dollar will do it in junior mineral stocks, which include companies that go around finding silver, gold, copper, etc. deposits. When these kinds of firms make a discovery, they often sell their properties, or the entire company, for exorbitant profits. And that's when investors walk away loaded.
Let me give you an example. About two years ago I discovered an unknown silver exploration stock that was trading at just 18 cents. I recommended the stock as a buy in my Secret Stock Files letter. Since that time the company has made multiple silver discoveries on its Mexican silver properties and has returned over 1,000% for subscribers who bought at the time of the original recommendation.
It's been a heck of a ride up, and as you can probably tell,I'm very happy with what we've seen from this company so far. But I'll tell you the truth, I think that there's still plenty of profit-gaining upside to this deal.
See, now that the company has already made their massive silver discovery, which will, by the way, probably end up being one of the largest silver discoveries in North America, major silver miners including Hecla Mining Company (NYSE: HL) and Industrias Peñoles, the largest silver producer in Mexico, will begin looking to buy them out. And, as I just mentioned, they'll most likely end up selling this property, or the whole company, for a significant premium.
I wish that I could tell you the name of this company so you'll be able to profit too. However, that would be unfair to paying subscribers. But if you become a subscriber to my Secret Stock Files investment newsletter today, I'll immediately send you the most recent update and report that gives details of this company and how today's investors will profit tomorrow.
To sign up for Secret Stock Files and get the report on this Mexican silver exploration company right now, simply click here. To learn more about Secret Stock Files, read on.
How the Secret Stock Files has already made current subscribe filthy rich.
The numbers speak for themselves: In the past three years, Secret Stock Files has made 34 winning stock recommendations that averaged an unparalleled 151.86% gain! These winners included a:
- +307.2% gain in MAG Silver;
- +467.0% gain in Western Silver;
- +527.7% gain in Storm Cat Energy;
- +504.1% gain in Silver Standard Resources;
- +529.6% gain in Wealth Minerals.
The open positions on the most current Secret Stock Files portfolio are doing even better.
In the past 52 weeks alone we've logged in gains as high as:
- +992.9%;
- +414.7%;
- +1,105.6%;
- +345.5%; and
- +2,338.9%.
A modest $15,000 investment in each of these stocks could have yielded you as much as $854,640! That's multiplying your investment money by 11.4 times in just 12 months!
Try squeezing that kind of return out of Wall Street so fast. Good luck. In fact, over the past year the DOW, NASDAQ, and S&P 500 have returned a paltry average of just 2%. You could do better with a standard bank account!
So, how have I consistently spank the pants off the market averages and deliver multiple triple-digit gains to our subscribers?
Well, in a very general sense it's all about limiting risk. Here's how it works...
The majority of the stocks recommended in Secret Stock Files are very small-cap junior companies. These are the types of deals that the brokers from the big investment houses will tell you are too "high-risk/high-reward" for general investing. And in a conventional sense, they're right. But they don't know that this risk can be so strictly limited.
Using our decades of combined experience in the junior equity markets, we limit the risk of investing in these high-reward small-cap stocks for our subscribers by carefully analyzing each and every aspect of a particular company before selecting it for recommendation. A new recommendation doesn't go out the door until we've scrutinized the stock weary. It's a true trial by fire.
And as you know by now, our efforts are paying off in spades for Secret Stock Files subscribers.
When you sign up to join me as a member of Secret Stock Files, I'll immediately send you the latest update and report on that Mexican silver company that I was just talking about. I'll also send you a brand new issue of Secret Stock Files every other week. Each issue will explain all the details of my latest Secret Stock Files recommendations.
These are the companies that I have personally and thoroughly examined using the same painstaking criteria that's already made my subscribers boatloads of money.
You'll be among the first to know about any company updates, news, progress and deals that are coming down the pike. And of course, with any stock I recommend or sells (for a profit, of course), you'll know where to buy it, how much you stand to make, and most importantly, when to sell.
So there's no reason to wait. Sign up today.
I look forward to hearing from you,
Luke Burgess
www.GoldWorld.com
P.S. There's an even faster way you could make a fortune in the silver market. And it's all thanks to a rare silver investment that not one in 1,000 investors will ever think about. Yet THIS diamond in the rough's reliably paid those in-the-know 852% every year for nine years — straight! I just put the finishing touches on the shocking report that spells it all out for you — absolutely free. Just click here.
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