Global Currency Crisis & Gold – What’s Really Going to Happen in 2011 – 2012

Following on from the first 2 parts in this series: Whats really going to happen in 2010 Whats going to happen in 2010/2011 – part II Another great writer and analyst makes it into our categories section, Bob Chapman of Global research with a seminal must read piece outlining the road ahead towards a new [...]

The Coming Gold & Silver Bubble

by admin on 07/04/2011

Gold & Silver are exploding!

If you have been to this site before you will be aware that we think that Gold and Silver are both headed way higher over the forseeable future. Far from being in a Gold bubble (yet) we believe both the  precious metals are actually only just getting started. We believe that history will look back on these smallish movements currently as where the mania actually got started, and in hindsight it will of course be all too obvious “why” it happened, sadly not so many can see it now, and all those who do not risk being utterly wiped out with their “paper” wealth over the coming years.

We’ve been saying that Silver is going to $50 or $60 since it was at $20, now it’s fast closing in on $40..

We’ve been saying Gold was going to $1400+ since 2009, and here we are fast approaching $1500.

More to the point, does it feel like we’re approaching the top? HAHAHA!! not exactly no, we have said this over and over again, when the world’s terminally broken economy and financial system is fixed, and all is well again, THEN we can expect the metals to top and fall.

However since the problems ARE terminal, and CANNOT be fixed, Gold & Silver will continue heading skywards for the forseeable future, and at the expense of almost everything else.

REPEAT – EVERYTHING ELSE WILL DEFLATE WHEN PRICED IN TERMS OF GOLD OR SILVER

If you have any doubts about this, we recommend that you fully digest this MUST LISTEN INTERVIEW of Eric Sprott on KingWorldNews

So as we are now fast approaching the original calls of $50-$60 Silver and things are really only just getting started it’s time to look at what the next 2-3 years holds, and we are once again in full agreement with this great article from Nico Pantelis at Goldmoney discussing the Gold/Silver ratio and it’s inevitable return to it’s historical mean. THIS IS HAPPENING NOW, please pay close attention.

Am I being too conservative with my silver price target?

by Nico Pantelis @ Goldmoney

For a long time now I have been studying the relationship between gold and silver. The price ratio of gold versus silver has been dropping in the last couple of years in favor of the white precious metal. At the moment, the gold/silver ratio is trading below the ”crucial” bandwidth of 40-to-50, currently hovering around 38x.

Gold/Silver price ratio

Although the drop seems overdone and the ratio set for an upward recoil, the technical damage caused by breaking through the 40 level has been done. We are thus in new territory as far as the gold/silver price ratio is concerned and the silver price direction. Since we are in a secular bull market for commodities in general, and precious metals specifically, this breakthrough marks the beginning of a new phase in the bull cycle. The gold/silver ratio could finally be on its way to our target of 16x, the historical bottom in the last century.

Taking into account my long-term price target for gold of $5,000 per ounce, we should see a substantial upward acceleration in the silver price in the coming months and years. By the way, my gold target of $5,000 was calculated back in 2005, when gold was trading around $500/ounce. I haven’t changed our target… but as the global crisis evolves further, and Bernanke & Co keep on QE’ing, maybe I should review my model.

But that’s food for thought for another time. For now, lets stick to my $5,000-dollar-gold target. This will bring us silver prices of over $300 per ounce. From current levels, I am still looking for a tenfold increase in the price of silver!

When I talked about these kinds of target prices for silver six years ago when the metal was still trading below $10 per ounce, people considered me a cowboy. Nowadays, things are looking more realistic, but still investors can’t seem to envisage a three-digit silver price. Well, I’ve got news for you: my target of $300 silver could turn out to be too conservative.

The latest research from Deutsche Bank shows that the gold/silver ratio averaged around 12x (hovering between 10x & 15x) in the Middle Ages. Furthermore, Newton fixed the gold/silver ratio to 15.5x from 1700 till 1873. More research on my part led to ancient Greece, where the existing gold versus silver mines varied between 10x and 13.5x.

Historic real silver prices

The real price difference between both metals should be dependent on available quantities in the Earth’s crust. And that’s where things start to get tricky. Scientists and geologists have varied conclusions, with some citing silver deposits over 20 times physical gold reserves, while others claim they are as low as 7x.

I think the lower end of these assumptions may be more useful as far as future silver prices are concerned, since silver is processed and consumed at a rapid pace — mainly due to the emerging market giants China and India — while gold is being hoarded at the same speed.

If we take all the possible gold/silver ratio’s from the past, combined with the assumptions of the physical metals probably available on our planet today, then we could see the gold/silver ratio drop to 10x in the current bull cycle.

This brings us to a silver price – still taking my target price for gold into consideration – of up to $500 per ounce and more.

I won’t go there (for now), but it makes my current target of $300 silver look less exaggerated, doesn’t it… stick to your guns, we still have a long way to go!

BuyGoldSilver.org say..

..what we always say, we are 100% all in Gold & Silver, if you  think now might be a good time protect your wealth with Gold &/or Silver:

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