Are Silver Prices About to Hit $100.00?
Since the beginning of the year, silver prices have been trending higher. In fact, the gray precious metal is one of only a few assets that are up in value. Be on the lookout, big gains could be ahead.
Before going into any details, please look at the chart below of the gold-to-silver ratio. At the core, this ratio tells us how many ounces of silver it takes to buy an ounce of gold. This ratio is usually used to value silver.
Gold-to-Silver Ratio Signaling Big Gains Ahead
If the gold-to-silver ratio is higher, it means silver prices are undervalued. If it’s lower, then the gray precious metal is overvalued.
Notice something interesting in the chart above? The ratio stands at a level that, over the past 20 years at least, has suggested silver prices are undervalued. Every time the ratio reaches 78–80, it starts to drop a few months later, then rests around 43.
Simple math question: what would the silver price be if the gold-to-silver ratio drops to 43? If we assume that gold prices remain the same, then silver prices would have to go to up to around $27.00 an ounce—an increase of more than 80% from where the precious metals prices currently sit.
Chart courtesy of www.StockCharts.com
Mind you, that’s just over the last 20 years or so. If you look at the long-term average of the gold-to-silver ratio (the past 200 years), it stands at approximately 37. For silver prices to reach that level, the precious metal’s price would to increase to around $31.00 an ounce, up 110% from its current level.
To add a little more spice to the mix, the natural ratio of gold to silver in the Earth’s core is around 17 (know that in early late 70s and early 80s, this ratio dropped below that figure). For the gold-silver-ratio to go to 17, silver prices would have to go well above $65.00 an ounce—a level more than 300% higher from silver’s current price and the highest ever on record.
Here’s what you have to keep in mind: in the calculations about where silver prices could go by looking at the gold-to-silver ratio, the price of gold was kept constant. As it stands, we see gold prices moving to the upside as well. So, the prices of silver could go much higher for the ratio to come true. Silver prices at $100.00 an ounce could be possible.
The Tough Question…
Investors have completely lost faith in silver and they have a solid reason. Over the past few years, the precious metal’s price has declined from its all-time highs.
With this in mind, is silver even worth a look?
Looking back at history, investors make the best return on your investment when prices are down and ignored. Silver seems to be at that stage—few like it and the majority hates it. In the midst of all this, the fundamentals and indicators are turning in favor of bulls. The gray precious metal is definitely worth a look.