There is a very specific condition for silver that, has
been a fairly reliable predictor for the price. Once this condition is met,
silver has historically soared over the next two to three years.
Since the mid-1990s, the gold/silver ratio (gold price
divided by the silver price) has hit 80 a total of four times. While the ratio
has certainly been higher in the past, since 1995 it has reversed shortly
after touching this figure.
And what has the silver price done when the ratio
reverses?
My friends at First Majestic Silver (full disclosure: I
own the stock) put together a compelling chart that shows this trend. If
you’re a silver bull, it’s pretty exciting.
They measured gold and silver’s price performance after
the ratio hit 80 and reversed. Check it out.
In all three of the last times the gold/silver ratio hit
80, it reversed and the silver price gained a significant percentage. It rose
in every instance, and since the ratio was falling, it outperformed gold by a
wide margin. And notice that the process was not short-lived, but lasted 2-3
years.
You’ll also notice that in every episode, the ratio
bounced higher after an initial fall, traded sideways or rose for a period of
time, and then abruptly continued to fall again. This mirrors what appears to
be happening now—which implies the trend is repeating and that silver will
likely be much higher by this time next year.
This tendency is fairly reliable, in part because it’s
repeated itself under the same conditions. Also because it occurred during a
bear market—the mid-1990s were so punishing, in fact, that the period was
dubbed the “nuclear winter” by miners. The trend even took place when we know
the silver market was manipulated.
- If the current trend plays out
as the prior three times, the silver price is headed much higher within
the next year. If it matches past performance, silver will reach
anywhere from $30 to $65.
This data argues for patience. It also suggests that now
is the time to accumulate the metal, before it rises. Depressed prices don’t
last forever.
To prepare for the next uptrend in silver, Mike Maloney
just bought some of these and some of these.
