Three signs silver prices have further to fall

While we’re certain the 12-year bull market in precious metals isn’t over, we do think there could be more pain for silver investors in the near-term. Here’s why…

A month ago, an ounce of silver was worth $33. Today, that same ounce is worth $29.50 – a drop of more than 10 percent. While we’re certain the 12-year bull market in precious metals isn’t over, we do think there could be more pain for silver investors in the near-term. Here’s why:

1) The Gold/Silver Ratio. The gold:silver ratio has been trending up since early March, and that trend probably won’t stop until the ratio re-tests January’s highs around 57:1. Why? Because swing and momentum traders themselves help cause the fluctuations in the gold:silver ratio. So long as the ratio is showing a clearly defined trend, and it’s not nearing any key resistance levels (or psychological barriers), those swing traders are going to short silver. Check out the steady upward climb in the gold:silver ratio:

[Source: Seeking Alpha]

2) Long live the dollar. The greenback can’t seem to do anything wrong. That’s despite explosive growth in True Money Supply (or the sum total of all the cash, deposits and notes that are floating about in our economy). Just check out this chart from Mises.org:

During ordinary economic times, you could expect the yields on U.S. bonds to spike in the face of such aggressive monetary easing. Instead, the dollar looks stable compared to the financial situation across the pond.

The Eurozone “is on a path that leads to eventual dismantling,” Peter Tchir of TF Market Advisors wrote in a note to clients on Monday (per IB Times). “Greece restructured debt, made different rules for different holders, and yet, the new bonds trade at 20% of par.”

Investors are telling the Eurozone countries that they no longer believe there’s a way out. That threat of a Eurozone breakup has bought the dollar some street cred that it probably shouldn’t have – and that’s bad for silver prices.

3) Even die-hard silver bulls are losing some of their excitement over the white metal. “While I do remain very bullish on silver, I must also admit that for the first time I can envision a scenario in which silver does not reach $100,” writes Simit Patel at Seeking Alpha. His reasoning? Gold will likely outperform everything (silver and stocks) if the equity markets remain soft.

Of course, all of the arguments above have me thinking that now might be the perfect time to buy silver. I’m not alone either. Check out my recent post Why Eric Sprott believes silver prices will triple to $100 an ounce in 2012. Just remember that if you do buy, though, you need to be able to hold onto the metal in the face of near-term weakness. Prices may be higher in three months, but what happens between now and then might not be pretty.

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Why the GFMS believes silver will rally after June

Higher silver prices look likely later in the year. Beware of painful bumps before we get there, though.

Despite weakness in the silver market, a leading London-based precious metals consultancy believes we’re setting up to see a spike in silver prices during the second half of 2012.

“Prices are probably going to head higher [in the second half of 2012] and we could see a push above $40 at some point,” though silver is unlikely to sustain those price levels Philip Klapwijk, the Global Head of Metals Analytics at Thomson Reuters GFMS, told Dow Jones Newswires last week. “I don’t think silver has the same get up and go that it did last year.”

Still, Klapwijk intimated that new monetary stimulus from the Fed could lead to a spike in gold and silver prices, and he believes that stimulus is likely in the summer or early fall.

Before that time comes, though, there could be pain. And if gold prices drop below $1,600 an ounce, silver prices could be susceptible to a price plunge.

GFMS, nonetheless, believes monetary stimulus will help silver will sprint higher in 2012. On top of that, they believe industrial demand for silver is strengthening, Klapwijk told Dow Jones. The extreme sell-off in silver late in 2011, probably lead manufacturers to deplete their silver stocks last winter. Those stocks need replenished, and they’ll need replenished this year.

In a separate interview with Kitco News, Klapwijk said he expects silver to trade between a low of $29 an ounce and a high of $42 an ounce.

Investors should also keep an eye on the gold-silver ratio, Klapwijk says. Currently, the ratio stands at 52. GFMS believes it could head higher (as silver weakens), perhaps touching 55. Historically, the ratio has stood around 53:1, but when silver prices warm up later in the year, Klapwijk believes the ratio could fall as low as 45:1.

Not everyone’s so optimistic, though. Steady erosion in the trading volumes for the iShares Silver Trust ETF (NYSE:SLV) has at least one writer arguing that we’re on the cusp of “a reckless close-out” in silver prices.

“(The selloff could be) without precedent in the history of this ETF and perhaps ever in the history of the modern silver trade (though don’t hold us to that),” writes Hugh L. O’Haynew at OakshireFinancial.

Even Citigroup’s gotten in on the action. Last week, they predicted silver prices as low as $27 an ounce by the end of 2013 (check out our post Why Citi says investors should stay away from silver for more).

Gloomy stuff. And a reminder that we shouldn’t over-leverage our bets on any commodity. If you do think silver’s going down, though, there are ways to profit off the decline. One of our favorites is the ProShares UltraShort Silver ETF (NYSE:ZSL). The ETF looks to return twice the inverse of the silver spot price. That means if silver goes down $1, ZSL should go up $2.

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Gold-silver ratio from 1840 to 2010

We can’t always see the forest for the trees. That’s why I was taken aback a bit by the incredible range we’ve seen in the gold-silver ratio over the past 170 years or so

We can’t always see the forest for the trees. That’s why I was taken aback a bit by the incredible range we’ve seen in the gold-silver ratio over the past 170 years or so. The chart below comes from a rather controversial document (dubbed Proviso 89.145) that was recently published by the South Carolina treasurer’s office.

Click for a larger version:

The chart only lists the gold-silver ratio every 10 years, but it’s remarkable to see that even then the ratio has swung from as low as 15.5 to as high as 97.3. That makes today’s gold-silver ratio of 51.9 seem down-right average.

For more extensive charts on the gold-silver ratio, check out Goldprice.org.

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Citigroup: Silver ready to outperform gold

The gold-silver ratio is tilted too far toward gold, and according to Citigroup, that means silver prices are setting up to surge higher.

Citigroup analysts sent a note to their clients last week arguing that silver looks undervalued compared to its pricier yellow cousin, gold.

Their reasoning? The gold-silver ratio is tilted too far toward gold. “The 200-day (gold/silver ratio) moving average is at 47.64, which we suspect will be tested,” analysts wrote. As it stands right now, the gold-silver ratio is hovering around 51.

During the height of the precious metals bull market 30 years ago, the gold-silver ratio fell as low as 16. Think of it like a pendulum that’s set to swing back toward silver. Per Citigroup, if silver can manage to close out a week above $36.55 an ounce, the metal could quickly spike higher toward $45.30 an ounce (a jump of 35 percent from current levels).

Retail investors are showing they like silver coins despite higher prices. Sales of American silver eagles were up to 615,000 this week (above the prior week’s 505,000). For the entire year, the Mint’s sold more than 6.8 million silver eagles.

The big question for precious metals prices going forward is how the story in Greece will play out. Draconian austerity measures could save the Eurozone from debt contagion. Or it could lead to social unrest that just might topple the current regime there. “Austerity measures are like shoes that are too tight,” an opposition leader said recently. “Sooner or later, you want to kick them off.”

Investors seem split on whether or not saving Greece from default is bullish or bearish for metals. Newsletter writer and economist Dennis Gartman is staying in gold as long the turmoil in Greece doesn’t undermine investors’ views of the metal as an alternative store of value (per Barrons).

If investors start growing confident that the worst of the Eurozone’s problems are behind them, though, that could push traders out of safe haven metals and into riskier assets like stocks. Should that happen, look for gold and silver mining stocks to possibly outperform the metals themselves.

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Silver price to hit $150 an ounce within the next 12 months?

How far will silver prices go before they peak? If we are going to hit $150 an ounce, it’ll probably happen sooner than later. Here’s why.

The steady upward march in gold and silver prices has the power to seduce investors into thinking that the trend is going to continue indefinitely. I’ll go ahead and tell you now that’s it’s not. Markets are ultimately driven by supply and demand, and what’s driving silver prices right now is the extraordinary growth in the money supply. So long as the Fed keeps pumping cash into the economy, the dollar will continue to weaken and that means higher gold and silver prices.

The most important question then is, “How far will silver prices go before they peak?” Global Investing Strategist at Money Morning, Martin Hutchinson, was brave enough to make a prediction over at MoneyMorning.com. His call? We’ll see silver prices at $150 an ounce within the next 12-18 months.

How likely is $150 silver within a year?

Since silver prices are, in large part, dictated by policies set by the Federal Reserve, we’ve got to look at the Fed’s roadmap for the next year to get an idea of where silver prices are headed. Reserve Chairman Ben Bernanke has already made it clear that interest rates will remain near-zero through at least 2013. That gives banks at least another 15 months of cheap cash to pump into the economy.

If we are going to see a mania in silver prices, it’s going to happen before the Fed raises interest rates. That means 2012 could be the sweet spot for silver prices – particularly if the Fed embarks on another round of quantitative easing (something Bernanke hasn’t ruled out).

Outside of the Fed’s actions, we can look to the gold-silver ratio for an indication of where silver prices are headed, Hutchinson argues. During the height of the silver mania in 1980, the ratio of silver to gold briefly touched 16:1. If that were the case today, silver prices would be at $113.25 an ounce. Instead, silver’s trading at $40.66 an ounce for a silver-gold ratio of 44:1.

Hutchinson believes the gold:silver ratio can’t hit the extremes of the 1980s for two main reasons: 1) The silver market was being manipulated by the Hunt brothers (see my post Silver Thursday, the Hunt Brothers, and the collapse of a precious metal for more); and 2) Industrial demand for silver declines when the silver price spikes.

Still, Hutchinson doesn’t rule out silver hitting a 25:1 ratio to gold. If that plays out, then every dollar gold goes above $2,500 an ounce, silver should climb higher than $100 an ounce. I’m convinced we’ll see gold prices above $2,000 an ounce by the end of the year (reference 10 reasons why we’ll see gold over $2,000 an ounce), and Hutchinson’s equally convinced gold will re-touch it’s inflation-adjusted high of $2,500 an ounce that was hit in 1980. He even speculates gold could approach prices near $5,000 an ounce (the 1980 peak adjusted for growth in the world’s money supply). If that happens, it’s difficult not to see silver prices north of $150 an ounce.

No matter where the price ultimately goes, it’s clear silver’s in an uptrend that should continue for at least a year and possibly as long as two years. Keep an eye on Fed policy for a barometer of just how high silver could go.

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3 reasons to move from silver into gold

Precious metals investors are re-assessing their holdings, and here are three reasons why gold will likely out-perform silver in the months to come.

The manic rise and fall in silver prices over the past few months has a lot of precious metals investors re-assessing their holdings. In the near-term, it looks like gold bugs have the upper hand. Here are three reasons why the yellow metal will likely out-perform silver in the months to come:

1) Slow and steady wins the race. The fundamental case for gold and silver hasn’t changed, but investor perception has. Whatever the cause of silver’s violent 30 percent plunge, the aftershocks of that move will likely continue for several months. Meanwhile, gold’s proven that its support won’t be knocked out so easily. Over the past month, the iShares Silver Trust ETF (NYSE:SLV) has shed nearly 18 percent of its value. The SPDR Gold Trust ETF (NYSE:GLD) has actually appreciated 0.4 percent during the same time span. That shows unflappable support for the yellow metal even as panic seemed to set in for commodities across the board. When the muck truly hits the fan, there’s nowhere safer than gold.

2) A ratio gone mad. There’s been a lot of speculation about the gold:silver ratio of late. Silver bulls like Eric Sprott of Sprott Asset Management – which manages the Sprott Physical Silver Trust ETV (NYSE:PSLV) and the Sprott Physical Gold Trust (NYSE:PHYS) – have been calling for titanic shifts in the ratio. Sprott’s actually argued that the gold:silver ratio could fall as low as 10:1 (meaning gold would cost just 10 times as much as silver). If that were the case today and gold stayed at $1,491 an ounce, we’d be looking at silver prices around $150 an ounce. Perhaps such a move will be possible over the course of several years, but don’t expect it over the next few months. Since the 1980s, the gold:silver ratio’s been closer to 60:1, which means $25 silver is just as likely as $150 silver (in fact, it’s probably MORE likely). In the words of Dave Kansas at the Wall Street Journal: “It’s more likely that the ratio will revert to modern-era norms rather than race back to the Napoleonic era.”

3) Silver ETFs push down prices. One of the most powerful drivers of silver prices today comes from physical silver ETFs. These stock market vehicles use the cash they get from issuing new shares to buy physical silver. Conversely, when the price of silver falls, ETFs like the SLV must liquidate their physical silver holdings to buy back shares. When the market’s trending up, the SLV can accelerate the rise in silver prices. During extreme silver sell-offs, SLVs decline floods the silver market with excess supply.

“On May 4th as silver plunged below $40, SLV experienced such heavy differential selling pressure that it was forced to liquidate 4.8% of its holdings in a single trading day!” writes Adam Hamilton and Scott Wright of the Australian investing site, TheBull. “This was 16.8 (million) ounces of physical silver that hit the markets!” That’s an enormous amount of silver. Hamilton and Wright point out that it’s 60 percent of Silver Wheaton Corp.’s (NYSE:SLW) silver output for an entire year, and it hit the market in 6.5 hours!

Gold’s stability in the face of panic selling in the silver market is evidence that gold holders have the stronger hand. More selling in the silver space, though, could be on the slate as the gold:silver ratio moves back toward reasonable levels. The ratio hasn’t fallen as low as it did last month in 30 years, after all. Interpret that how you may, but I see it as evidence of an anomaly that’s in the process of correcting.

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Gold-silver ratio: Is momentum shifting towards gold?

s it time to re-allocate some of your silver holdings into gold? No one knows for sure, but the powerful upswing in gold prices while silver sat by languishing was enough to give me pause.

For the first time in weeks, gold noticeably out-performed silver. On Friday, New York spot silver prices fell 2.1 percent from $49 to $47.94. Gold, on the other hand, spiked powerfully from $1,539 to $1,565.70 – a gain of 1.7 percent.

Is it time to re-allocate some of your silver holdings into gold? Could we be witnessed a shift in investor sentiment? No one knows for sure, but the powerful upswing in gold prices while silver sat by languishing was enough to give me pause. Here are some possible explanations for the shift:

1) Big money is moving in. In the wake of Fed Chairman Ben Bernanke’s reassurance that QE2 will NOT end early and that interest rates will NOT rise anytime soon, the last few vestiges of risk in the precious metals markets were removed (at least for the next two months as QE2 plays out). With more risk removed from the equation, hedge and mutual fund managers may have felt more comfortable making bets on precious metals. If that’s the case, those deep-pocketed funds tend to favor gold over the more volatile silver market.

2) Gold’s playing catch-up. Since Jan. 1, silver has rocketed up nearly 55 percent from $31 to $48 an ounce. During that same time frame, gold’s clocked gains of just 12.6 percent. With those sorts of numbers, the argument that silver prices are more subject to industrial demand starts wearing thin. According to the Silver Institute, industrial demand accounts for nearly half of the total demand for silver. If the rest of the demand for silver is coming largely from investors, you’d expect gold to be up about half as much as silver (i.e. 25 percent or more on the year). This could be a case where the silver market has gotten ahead of itself, and it’s gold’s turn to catch up.

3) Technical trading. Silver sellers came out in full force after the metal finally breached its all-time nominal high of $49.45 on Thursday. I suspect silver could have trouble climbing over that psychological barrier again. Once, it does, though, I fully expect silver to outperform gold moving forward. Let’s just call this a temporary bump in the road.

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Why silver, why now? Here are five reasons

Silver bulls still have lots of compelling arguments for a continued rally in prices. Here are five reasons to invest in silver now.

Silver’s allure and extreme volatility have earned it a rather disconcerting nickname: the Devil’s Metal. On Monday, silver’s price briefly surged over $49 an ounce putting it within $1 of a 30-year-high. A few hours later, the white metal had shed 8 percent – plunging by more than $4 an ounce.

Not everyone’s ready to toss their silver positions overboard, though. Silver bulls still have lots of compelling arguments for a continued rally in prices. Here are five reasons to invest in silver now:

1) The ultimate hedge against inflation. This is one of the hardest things to convey to non-investors, but the past has shown us that precious metals act as a store of value during inflationary periods. Here’s how it works: since the dollar is no longer on the gold standard, it’s subject to supply and demand just like any other asset. If you increase the number of dollars in circulation, the value of existing dollars falls.

Let’s say you have $1,000 in the bank, and inflation is growing at 10 percent a year (which it is currently is according to Shadowstats.com). At the end of a year, your dollars are actually worth 10 percent less than they were at the beginning of the year. The number written on the bills hasn’t changed, but the amount of milk or gasoline or the number of Oreos you can buy with that $1,000 has certainly changed.

Now, let’s suppose you’d sunk your $1,000 into silver coins on Jan. 1. By the end of the year, you could sell those same coins for (in theory) $1,100 and buy the same amount of milk, cookies and gasoline you could have at the beginning of the year.

That’s a highly simplified example. Last year, for instance, silver appreciated 80 percent in nominal terms. That means your $1,000 would have been worth $1,800 by the end of the year. It wouldn’t have acted solely as a store of value, it would have grown, too. Call it the miracle of finite commodities.

When you print a limitless supply of dollars, your actions aren’t impacting the finite world of silver. That means as the supply of dollars increases, their value goes down. Silver, on the other hand, can’t be mass produced in a laboratory, so its prices aren’t subject to the whim of the Federal government.

2) The historic gold:silver ratio. Precious metals investors closely watch what’s known as the gold:silver ratio. It’s found by dividing the current price of gold by the current price of silver. As of this writing, for instance, gold’s trading at $1,497 an ounce and silver’s at $44.91 for a ratio of 33:1. In other words, it would take 33 ounces of silver to buy one ounce of gold.

Depending on your time frame, the historic gold:silver ratio could be anywhere from 10:1 to 70:1. Over the past 100 years, the ratio has hovered close to 65:1. In centuries past, that ratio was much lower – somewhere around 16:1. That’s pitted two different types of silver investors against one another: those who use modern history as a scale for the gold:silver ratio and those who look at things over a much longer time horizon – say over the past 1,000 years.

Nick Barisheff president and chief executive of Toronto-based Bullion Management Group argues that silver has historically traded at a ratio of 16:1 – a number that’s roughly equivalent to the ratio of silver to gold in the ground (per the Toronto Sun). “In terms of that ratio, silver should be twice the price that it is,” Barisheff tells the Sun.

3) Industrial demand. Unlike gold, which is primarily used in jewelry and as a monetary metal, silver is used for a wide range of industrial applications. In 2010, industrial demand for silver climbed above 487 million ounces, according to the Silver Institute. That accounted for nearly half of the worldwide supply of 1.05 billion ounces. Silver is consumed by industry for use in batteries, bearings, soldering, electronics and catalysts. In addition, a number of new and emerging uses for the metal prove promising in diverse fields from medical applications to solar energy and water purification.

4) Volatility is your friend. If you believe in the underlying argument for higher precious metals prices, silver will give you more bang for your buck than gold in the event that you’re correct. Because the silver market is smaller and more liquid than the gold market, its price can swing aggressively. Where gold goes silver does, too, but it does it faster. The trade off is a greater degree of risk. If you can stomach the powerful price swings, you’ll probably make more in silver than you would investing in gold.

5) The high cost of mining. Most of the silver that’s mined from the earth (about 70 percent of it, in fact) is mined as a by-product of mining for other metals. Even with silver trading over $45 an ounce, that’s not quite enough to bring costly, full-scale silver mines into production. That means we probably won’t see a large influx of fresh silver production hitting the market anytime soon – even in the face of rising demand. Without more supply to meet growing demand, prices have just one direction to move; and that’s up.

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Gold silver ratio pointing to higher gold prices?

With an unprecedented plunge in the gold-silver ratio, here are three reasons to consider reallocating your portfolio in favor of gold.

In two short years, the gold:silver ratio has plummeted 62 percent from 80:1 to 30:1. That means it takes a mere 30 ounces of silver to buy one ounce of gold. The dramatic shift of fortunes has a lot of investors and analysts saying silver’s overheating. Is it time to jump ship and swim for the golden shores? Perhaps. Here are three reasons to consider reallocating your portfolio in favor of gold:

1) ‘Mean Reversion.’ The gold:silver ratio is at 30-year lows. “Generally, relative strength relationships ‘revert to normal’ or at least move towards equilibrium over time,” writes Corey Rosenbloom at AfraidToTrade.com. Suffice it to say that a gold:silver ratio of 30 is far from normal. Over the past three decades, the gold:silver ratio has averaged somewhere between 65 and 70. Over the long haul, we’ll probably look back on today as an aberration. When the gold:silver ratio decides to revert to ‘normal,’ which we assume it will eventually, it could happen quickly. And it could happen in two quite different ways: “The mean reversion scenario suggests other outcomes such as a dramatic ‘catch-up’ rally in gold,” Rosenbloom writes, “or a ‘blow-off top’ correction down in silver.” Either way points to gold as a better option.

2) Rife with speculation. The fundamentals for investing in gold and silver are quite similar. Both have historic status as a monetary metals. They even have their own symbols for trading on international currency exchanges. Logically then, both metals should have followed similar trajectories after the Fed announced its quantitative easing program, QE2, in September. Instead, gold futures have climbed 20 percent while silver shot up 150 percent. That leads me to believe the rise in silver prices has been driven by speculators and momentum traders who are attracted to the smaller, more volatile silver market. If that’s the case and the momentum shifts away from silver, prices could collapse quickly.

3) Government Intervention. Over the long haul, I’m convinced there’s still a bullish argument for gold and silver prices. QE2 may be coming to an end in June, but unless the Fed plans to aggressively raise interest rates, inflation will start sinking its teeth into our pocketbooks. In such an environment, there are few places to retreat outside of precious metals. Hedge fund and money market managers know as much, and since they control such vast amounts of capital, entering the silver market in a large way isn’t really an option. The gold market, though, has the depth and stability to absorb enormous inflows of capital. Expect gold to outperform in such an environment.

Of course, for all the pontificating of analysts and writers (myself included), there’s a chance that the gold:silver ratio has been artificially high over the past few decades. Perhaps the market’s shaking loose the shorts? Or maybe the sudden change in silver’s fortunes is due to renewed industrial demand from the solar industry?

Eric Sprott of Sprott Asset Management helps oversee more than $1 billion in assets, and he’s publicly argued that we’re in the midst of a watershed moment in the precious metals market. He’s went on the record calling for a gold:silver ratio as low as 10:1. Such bold predictions by respected investors could, in and of themselves, be pushing silver prices higher much faster than gold. Right now, though, the present looks very different than the past, and that should be enough to give all investors pause.

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Why silver prices are making gold’s gains look meager

Gold and silver may swap places as the precious metal investment of the day, but the underlying message is that investors have lost faith in the dollar and other global currencies.

Long viewed as the red-headed stepchild of gold, silver’s returns over the past year has made gold look like a second-class metal. Indeed, silver’s outpaced gold by more than 500 percent over the past year, according to Golden Economizer at SeekingAlpha. Why exactly has silver done so well and will the trend continue?

Gold is the safest safe-haven.

Individual investors with portfolios in the tens of thousands of dollars (and often less) have trouble conceptualizing the amount of money controlled by hedge funds, mutual funds and corporations. Managers for those funds have one primary mandate, and that’s not to lose money for their clients. If you’re managing a billion dollars, for example, a loss of even 1 percent means you’re out $10 million!

When the stakes are that high, you’ve got to got to choose your investments carefully. That makes gold more attractive for institutional investors who need to ensure they’re not going to wake up with a gaping hole in their multi-million dollar portfolio. Silver, which is far more volatile than gold, poses a much greater risk. Of course, fund managers can’t ignore silver’s gains forever, and the metal’s recent out-performance of gold could be attributable in no small part to more institutional interest in silver.

Silver will help power the future.

Silver’s status as an industrial metal got some added clout in the wake of Japan’s ongoing nuclear disaster, as governments around the world turn to solar power as a way to take some pressure off mounting energy needs. Thanks to silver’s conductive properties, it’s a common ingredient in solar panels, and that demand is likely to continue growing.

Industrial uses of silver grew by 20.7 percent to 487.4 million ounces last year, per the The Silver Institute. High gold prices, on the other hand, have decreased industrial demand for the metal as companies turn to cheaper alternatives.

Restoring the ratio.

When the ongoing bull market in precious metals started in 2003, the gold:silver ratio stood at 83:1. Over the past century, the gold:silver ratio has averaged roughly 36:1, according to Ian McAvity, one of the founders of the Central Fund of Canada. As of Friday, the ratio was 34:1 and shrinking.

Eric Sprott, the chief investment officer at Sprott Asset Management, has been arguing for months that we could see the ratio tumble to 20:1 or lower – perhaps as low as 10:1 – as the ratio’s pendulum swings back toward its historic average. At the height of the silver bubble in 1980, the gold:silver ratio fell as low as 17:1 as investors flocked to the metal. It’s unclear where the ratio might end up this decade, but another run at a historically low ratio might not be out of the question – particularly when gold prices are hovering near $1,500 an ounce.

Gold and silver tell the same story.

Gold and silver may swap places as the precious metal investment du jour, but the underlying message is the same: investors have little faith in global currencies. The U.S. government is pumping $110 billion a month into the economy, and that’s driving down the value (or at least the perceived value) of the dollar. So long as the Fed’s spigot remains open, precious metals and other finite commodities will continue to outperform.

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