Silver Prices Are Setting Up for 900% Move in Silver?

Silver Prices Are Setting Up for 900% Move in Silver?Three Reasons to Be Bullish on Silver Prices

It’s very simple: if you are in the market to double your money, then paying attention to silver prices could be a great idea.

You see, to assess where the gray precious metal could go, I look at three indicators: the gold-to-silver ratio, the correlation between silver and money supply, and the exploration-to-production ratio of silver mining companies. These three indicators are screaming, “If you look away, you could be making a big mistake!”

Looking at the gold-to-silver ratio. It essentially tells us how many ounces of silver it takes to buy an ounce of gold. With this said, look at the chart below and pay attention to circled areas.

Gold - Silver Spot PRice

Chart courtesy of

Traders and investors use this ratio to value the price of silver. If this ratio is high, it means silver prices are undervalued. If it’s low, silver prices are deemed overvalued. Currently, as is evident in the chart above, this ratio is close to where it was before silver prices started to make a run for $50.00 back in 2009. It’s now moving downward and I really question if it will hit the level last seen in 2011—around 32. For that to happen, keeping gold prices the same, silver prices will have to rise to roughly $40.00—that would be an increase of 135%.

The correlation between the money supply and silver is important, too. You see, silver is essentially a precious metal. As the money supply increases, one would assume silver prices would increase as well.

Look at this chart:

MZM Money Supply Index

Chart courtesy of

See something interesting here? In the last 20 years at least, whenever the correlation between silver and the money supply turned negative, silver prices jumped up big-time. Between 2000 and 2003, the correlation was negative. In this period, the bull market in silver prices began. Silver prices went from around $5.00 to $50.00, an increase of 900%.

Now, this correlation has been negative for a few years. I will not be surprised if the silver prices we see now are the beginning of the next bull market in the precious metal.

As for the exploration-to-production ratio of mining companies, it’s saying a big shortage is on its way. Remember: when there’s a shortage in supply, prices shoot through the roof.

Silver mining companies are pulling back on exploration spending. Consider Pan American Silver Corp. (USA) (NASDAQ:PAAS), a major silver producing company. In 2015, the company produced 26.12 million ounces of silver, and its exploration spending was just $11.94 million. This amounts to about $0.45 of exploration spending for every ounce produced. Over the last few years, this figure has declined. In 2014, the company produced a similar amount of silver, but spent $13.22 million—$0.50 for every ounce produced. (Source: “Annual Report 2015,” Pan American Silver Corp., last accessed April 22, 2016.)

For 2016, the company expects to spend just $8.9 million on exploration. If we assume it will produce a similar amount of the precious metal (approximately 26 million ounces), it will be spending $0.34 for every ounce produced.

Here comes the problem: spending on exploration is essentially investing in future production. Mind you, I don’t mean to single out Pan American Silver whatsoever. I see companies across the board are doing this. This phenomenon will impact production ahead, and with demand remaining solid, we could have a shortage.

Silver Prices Outlook for 2016

Dear reader, silver prices are up close to 25% so far in 2016.

I truly believe there’s more upside ahead. My statement is going to sound very bold to some, but don’t be shocked if by the end of this year, silver prices are more than half-way to $50.00 an ounce.