Is Silver the Sleeper?

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Before we ever get to even $100, which I have forecast as a price I do expect silver to achieve, we must move above $30, then $40, and take out the old nominal high of $50. I think you see my point, and the ultimate high price is impossible to determine, because only the market knows. But in my view, silver has way too many things going for it not to continue higher over the next several years.

Last week in my first column for International Business Times, I addressed the theoretical price of gold in U.S. dollar terms. This is a straightforward calculation based upon the M1 currency supply and the amount of gold the Treasury of the United States claims it owns.

Naturally, putting your neck out for a gold price leads to the next logical question and that is, “What price will silver reach at its high point?” This question is much more difficult to answer, because silver is not considered to be money in any government’s monetary base, either officially or unofficially...

Coming back to forecasting the price of silver, we need to define a methodology. One way is to use what I call the classic, or monetary, ratio. This is based upon a bimetallic standard, which was exercised when both gold and silver were used daily as money. The ratio was fixed between 15-16 to 1. In other words, one ounce of gold bought 16 ounces of silver. If we use our gold price of $2900 derived in last week's column, and divide by 16, that puts silver at $181.25 per ounce.

Is this possible? Under our current financial conditions I am reluctant to rule out anything, but I am also a practical investor. Before we ever get to even $100, which I have forecast as a price I do expect silver to achieve, we must move above $30, then $40, and take out the old nominal high of $50. I think you see my point, and the ultimate high price is impossible to determine, because only the market knows. But in my view, silver has way too many things going for it not to continue higher over the next several years.

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