There are some indications coming from various economic sources that may be pointing to solar flare activity in the realm of all things silver. If you’re someone that has been buying silver bullion or if you’re someone that’s considering dipping your toe into the market this could be very good news. Let’s take a look the top 3 reasons that will ignite its upward burst.
1) As I write today, with the price of spot gold at $1605/oz and spot silver sitting at $29/oz, the current silver to gold ratio is 55:1. Mathematically speaking, it would take 55 ounces of silver to purchase 1 ounce of gold. Historically, the gap between the two has been about 15:1 and so if go simply remains at it current price and the silver gap decides to revert back to its norm silver will jut upward to $107/oz. A nice jump for doing nothing except letting nature take its course.
2) Dollar printing. The price of gold and the value of the dollar have always travelled in two opposite directions. The more dollars in circulation the higher the price of gold. And, this isn’t due to a rise in the value of gold. It’s due directly to the value of the dollar. More dollars in circulation means a drop in the value of said dollars resulting in the rise in the price of commodities. Oil has the same response as gold to the increase of the money supply. Just ten years ago the price of gold was just under $300/oz. Has its value risen? No, but, the supply of money has and it has risen rapidly.
The full impact of the recent flood of money printed has yet to hit our shores, but, is making its way around the world and can be seen in all of its ugliness in countries such as Greece and England, as well as the countries of the Middle East. The impact here will be just as profound.
3) Inflation twisted numbers. Our “always looking out for your best” government officials have a knack for “fudging” certain statistics. Inflation is one of those. John Williams at Shadowstats.com tracks the true inflation rates and in a recent interview with King World News (Dec. 20, 2011) gives us this quote:
The earlier all-time high of $850.00 of January 21, 1980 would be $2,472 per troy ounce, based on November 2011 CPI-U-adjusted dollars, $8,702 per troy ounce based on SGS-Alternate-CPI-adjusted dollars.
In like manner, the all-time high price for silver in January 1980 of $49.45 per troy ounce, although approached earlier this year, still has not been hit since 1980, including in terms of inflation-adjusted dollars. Based on November 2011 CPI-U inflation, the 1980 silver price peak would be $144 per troy ounce and would be $506 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars.”
John Williams also believes we’re headed for massive hyperinflation and that the price of gold will likewise rise exponentially. Talk of gold hitting $7000+/oz and silver reaching $500+/oz is becoming more and more common in economic writings.
Bonus reason: The crushing demand for silver. Most people don’t realize the true industrial value of silver. The metal can be found in batteries, bearings, electronics, soldering and automotive parts. Silver is essential for the production of plastic and can be found in jewelry, tableware and insulation. It has its uses in solar energy, water purification systems, glass and x-ray equipment. According to the The Silver Institute, the demand for silver has risen from 877 million ounces in 2001 to 1056 million ounces in 2010. Add in Chinas’ voracious, unquenchable appetite for the metal and a global awakening, yet to come, of the need to protect oneself from currency devaluation via the purchase of gold and silver and the result will be explosive.