Given the fact that a) the historical movement of silver is 90 – 98% correlated with gold, b) silver is currently greatly undervalued relative to its average long-term historical relationship with gold and c) many analysts predict a parabolic rise in the price of gold over the next 5 years it is realistic to expect that silver will also escalate dramatically in price – but by how much? This article applies the historical silver to gold ratios to come up with a range of prices based on specific price levels for gold being reached.
The Silver:Gold Ratio
How both gold and silver perform, in and of themselves, does not tell the complete picture. More important is the price relationship – the correlation – of one to the other over time, the silver:gold ratio.
As mentioned in the introduction:
- the historical movement of silver is 90 – 98% correlated with gold,
- silver is currently greatly undervalued relative to its average long-term historical relationship with gold with a current silver:gold ratio of 74.7:1 and
- many analysts predict a parabolic rise in the price of gold over the next 5 years (here are 42 specific price forecasts for that period).
As such, it is realistic to expect that silver will also escalate dramatically in price (here are 14 specific price forecasts for that period) and most likely even more so than that of gold (see here and here for why that could well be the case).
Let’s look at the silver:gold ratio from several different perspectives:
- since 1985 the mean ratio has been 45.7:1
- during the build-up to the parabolic blow-off in 1979/80 the ratio dropped from 38:1 in January 1979 to 14:1 at the parabolic peak for both metals in January, 1980.
First let’s use the price of $1,200 for gold and apply the silver:gold ratios mentioned above in approximate terms and see what they do for the potential % increase in, and price of, silver.
- Gold @ $1,200 using the 45:1 ratio puts silver at $26.67
- Gold @ $1,200 using the 14:1 ratio puts silver at $85.71
Now let’s apply the projected potential parabolic peaks of $2,000, $3,000, $5,000 and $10,000 to the various silver:gold ratios and see what they suggest is the parabolic top for silver.
Silver’s Potential Price Range With Gold At $2,000
- Gold @ $2,000 using the ratio of 45:1 puts silver at $44.44
- Gold @ $2,000 using the ratio of 14:1 puts silver at $142.85
Silver’s Potential Price Range With Gold At $3,000
- Gold @ $3,000 using the ratio of 45:1 puts silver at $66.67
- Gold @ $3,000 using the ratio of 14:1 puts silver at $ 214.29
Silver’s Potential Price Range With Gold at $5,000
- Gold @ $5,000 using the gold:silver ratio of 45.1 puts silver at $111.11
- Gold @ $5,000 using the ratio of 14:1 puts silver at $357.14
Silver’s Potential Price Range With Gold at $10,000
- Gold @ $10,000 using the gold:silver ratio of 45:1 puts silver at $222.22
- Gold @ $10,000 using the ratio of 14:1 puts silver at $714.29
It would appear that, any way we look at it, physical silver is currently undervalued compared to gold bullion and is in position to generate substantially greater returns in the future than investing in gold bullion.
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1. 42 Specific Gold Price Forecasts by Year & Analyst
Over the years only 42 pundits have been bold enough to provide a specific date as to when their forecast for the future price of gold (and silver, in some cases) would be realized. This article provides that information along with the criteria & rationale for their determinations. Read More »
2. Silver: 14 Price Forecasts By Analyst By Year (2015 – 2020)
Over the years only 14 pundits have been bold enough to provide a specific date as to when their forecast for the future price of silver would be realized. This article provides that information along with the criteria & rationale for their determinations. Read More »
3. Gold Could Possibily Reach $3,000 – $4,500 By 2016! Here’s Why
Since 1999 the gold price has moved in concert with the growth in the US Federal Reserve Balance Sheet including the recent correction in both during the past three years. Accordingly, the following objective analysis forecasts the gold price out to 2016 based solely on historical Central Bank data. Read More »
4. New Analysis Suggests a Parabolic Rise in Price of Gold to $4,380/ozt.
According to my 2000 calculations, if interest rates and inflation stay constant over the next 2 years, we could expect to see (with 95.2% certainty) a parabolic peak price for gold of $4,380 per troy ounce by then! Let me explain what assumptions I made and the methods I undertook to arrive at that number and you can decide just how realistic it is. Words: 740
5. Gold Projected to Reach $4,000/ozt. Sometime Between Late 2015 & Mid 2017! Here’s My Rationale
It is very likely that national debt and the price of gold will continue their 11 year exponential growth trend. Since gold correlates closely with debt gold should reach $4,000 as early as November 2015 (should there be another crash or an unexpected bout of Congressional fiscal irresponsibility) and no later than June 2017. Time will tell!
6. Gold Projected to Reach $4,000/ozt. Sometime Between Late 2015 & Mid 2017! Here’s My Rationale
I am not predicting a future price of gold or the date that gold will trade at $4,000, but I am making a projection based on rational analysis that indicates a likely time period for gold to trade at $4,000 per troy ounce. Yes, $4,000 gold is completely plausible if you assume the following:
7. The Future Price of Gold and the 2% Factor
It is my contention that the price of gold rallies whenever the U.S. dollar’s real short-term interest rate is below 2%, falls whenever the real short rate is above 2%, and holds steady at the equilibrium rate of 2%. Furthermore, for every one percentage point real rates differ from 2%, gold moves by eight times that amount per year. So if the real rates are at 1%, gold will move up at an 8% annualized rate. If real rates are at 0%, then gold will move up at a 16% rate (that’s been about the story for the past decade). Conversely, if the real rate jumps to 3%, then gold will drop at an 8% rate. [Let me explain.] Words: 982
8. Gold Will Reach $3,000/$4,000/$5,000 Before This Bull Market Is Over! Here are 12 Factors Why
I believe that the price of gold will… reach… $3,000, $4,000, and even $5,000 [per troy] ounce…during the course of this long-lasting bull market, a bull market that still has years of life left to it…[although] prices will remain extremely volatile – with big swings both up and down along a rising trend…The future price of gold is a function of past and prospective world economic, demographic, and political developments [and in this article] I review some of these developments and trends – so that you can come to your own “golden” conclusions. Words: 3800
9. Silver Will See Much Greater % Price Appreciation Than Gold – Here’s Why
The price of silver is going to go much, much higher – much higher – over the next decade relative to gold. Below are 5 solid reasons why I believe that is the case. Read More »
10. Silver Is A Better Choice Than Gold! Here’s Why
We are at the beginning of a major shift out of paper assets into real assets and the more I studied the merits of owning gold and silver the more I realized that silver was the smart decision. Let me explain. Read More »
Any international even could make the value of Silver (and other physical PM’s) ZOOM UPWARD.
Imagine what would happen if Russia got more aggressive or the US$ got “re-adjusted or any number of other things that caused a sudden spike in PM’s values as compared to flat money globally!
We are now living in volatile times so it just makes sense to have percentage of your portfolio in physical PM’s!
Yes yes yes but when when when……. I can only live so long………
There’s no way we get out of this mess without silver over $700. While the Feds don’t want silver above $50, the whole economy is about to blow up, if they have to inject $10 Trillion to keep it alive it’ll only send silver higher.
In this lifetime or next?
With all the blatant condoned central bank manipulation in the futures market it will be $95 before silver hits $20 an ounce again, let alone $200 ….