In Saudi Arabia almost everyone knows about gold prices unlike in other countries because of its consumption, gold prices are up 93 percent in the past 24 months. But take a look at silver as an investment. What most investors don’t know is that even though silver has never been as highly valued as gold in dollar terms, it has the potential to be a lot more profitable than gold in future.
There’s a hidden link between gold and silver — which I believe should cause silver prices to soar more than gold in the next few years.
Despite fluctuations, gold prices have historically been around 16 times the price of silver. The logic behind this is simple: Gold is roughly 16 times rarer than silver inside the Earth’s crust, according to the American Geological Institute. That’s why almost every major world government in history set the value of silver at 1/16th the price of gold.
Based on this value, if gold costs $650, silver should cost around $41. But it doesn’t. Today if silver costs only $11 an ounce. That means right now, silver is historically undervalued by close to 300 percent. Right now, gold sells at a price 50 to 60 times higher than silver.
In the 19th and 20th centuries, major world governments stopped using silver as money. And even though the white metal remained just as precious, people didn’t see it as a “valuable” investment anymore.
Many experts believe that under certain market conditions, silver prices rise faster than gold’s ... until silver reaches its historical value of 1/16th the price of gold. Because it happens almost every time inflation is high ... people’s faith in the dollar is low... and there’s a war or crisis going on. Watch the pattern. If it happens once, you could dismiss it. If it happens three or four times during 100 years of trading — it’s a powerful pattern:
* 168 percent returns during World War I: In 1914, at the beginning of World War I, silver cost 1/41 the price of gold. By 1919, it was worth 1/15th. And smart investors made 168 percent on silver in just 5 years.
* 488 percent returns during World War II: In 1941, when World War II was ripping the world apart, silver was at 1/96 the price of gold. By 1967, it was worth 1/16th. And silver investors made a whopping 488 percent.
* 433 percent returns during the 70s Oil Crisis: In 1975, during America’s biggest oil crisis, silver cost 1/40th the price of gold. By 1979, it was worth 1/14th. Again, silver investors made 433 percent in only 4 years.
All the above time periods had one thing in common: Investors didn’t trust paper money. They bought gold and silver to protect and grow their wealth.
That’s what’s happening right now. As the “war on terror” and Iran crisis goes on — and as inflation plagues America — silver is the best way to profit. It’s still selling at 1/50th the price of gold, and has a lot of catching up to do.
So brace yourselves, because as the wall street journal reports, “Silver’s recent rise means it could ... scale new heights.”
And the truth is, catching up to gold prices is just the beginning. That could give you a nice 300 percent gain for starters — but the potential for silver as an investment over the next few years is even more astounding
Right now, Americans are uneasy about paper money — because the dollar isn’t buying as much as it used to. Oil, gas, and food prices have all gone up — without much increase in income levels.
And since the US dollar has become the global currency for trade, any effect on the dollar will be felt in precious metals too.
In short, people are losing faith in the US dollar. That’s what happens in times of inflation. Investors distrust paper money and anything based on it — such as stocks and bonds. They turn instead to hard assets — like land, precious metals, and oil. Right now, investors are finding comfort in gold ... and for good reason.
“Rising inflation and continued negative real interest rates make a good environment for precious metals,” Barron’s reports.
Bill Murphy, Chairman of GATA, the international watchdog organization monitoring gold markets, says, “gold should top $1,000 within two years on its way between $3,000 and $5,000.”
One of Europe’s largest equity brokerages, Cheuvreux, says “we could see the gold price spike up much further, possibly to $2,000 an ounce or even higher.”
Sure, gold has dipped since its $730 high point in May. But a few corrections are bound to happen along the way.
Before gold hit its peak during the last precious metals bull market between 1974 and 1980, it went up and down several times.
Even if gold reaches the lower estimate of $2,000, investors could make up to 200 percent returns, based on gold’s current price of $650. That’s pretty good.
But silver could get you 5 times higher returns. During the last silver boom, some Americans made 1,585 percent. Every time gold prices soar, silver prices soar about twice as high.
During the last precious metals bull market, gold went from $35.12 to $306.68 — a respectable 773 percent. But silver shot up from $1.29 to $21.793 during the same period — an incredible 1,585 percent.
Silver was already up 114 percent in the past 12 months. Gold, on the other hand, is only up 70 percent. It’s taking fewer and fewer ounces of silver to buy one ounce of gold. Silver could likely continue to become more and more precious until it hits 1/16th the price of gold — its historical value.
If we keep our low estimate of gold at $2,000 — silver’s reversion to its historical value could cause it to spike from $11 to $125... This means: One can end up making enormous profits, even if the price of silver does only half that well, you should easily double or triple your money.
Most invest in silver by purchasing silver bars or coins. This isn’t a bad idea — but if you worry about the hassles of shipping, storage, and insurance, then buy silver mining stocks. Or buy Silver Exchange Traded Fund — where the price of the fund is tied directly to price of silver. If gold glitters, then silver shines.
