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$320 silver is going to outperform $5,000 gold

Posted on 23 September 2010 with 31 comments from readers

ArabianMoney editor and publisher Peter Cooper is also the author of the book ‘Dubai Sabbatical: The Road to $5,000 Gold’ still selling on Amazon.com. But the latest edition of the ArabianMoney investment newsletter hazards a prediction that if gold hits $5,000 an ounce then silver will be $320 or even $400 an ounce (click here to sign-up).

The newsletter points out that the centuries old average ratio of the silver to the gold price is 15. Today it is four times higher at 60. That leaves a lot of room for silver to outperform gold as precious metal prices really lift-off, and to close that gap as silver becomes treated like a currency again as it was in the past.

Catching up with gold

Silver also has to more than double in price just to equal its all-time high set 30 years ago. And that comes on top of silver keeping up with a rising gold price.

So if the price of gold quadruples to $5,000 as ArabianMoney expects within two to three years then silver has the potential to rise 16 times just to regain its historic relationship to the gold price or to $320 an ounce. If it overshoots the average, as markets almost always do then a 20-fold increase in the silver price to an all-time high of $400 is on the cards.

From what ArabianMoney understands the banks were quietly adjusting their silver future positions in August. That helps to explain why silver did not fall in August with stocks under pressure.

Precious again

It should have been selling off as an industrial commodity used in electronics among many other manufacturing processes. But it did not. Silver is acting again as a precious metal and currency.

Silver investment expert David Morgan says that gold will preserve the value your money in inflationary times while silver is the precious metal that will actually make you rich. So does Rich Dad who owns silver mines these days rather than buy-to-let property.

But caveat emptor silver is also the most volatile of commodities and dropped more than 50 per cent in 2008, so unless you have a very strong stomach for volatility do not over commit your exposure to silver.

This month’s edition of ArabianMoney has some timely advice on the best ways to invest in silver and offers a monthly insight into the precious metals’ market for subscribers. But you might want to wait and see if there is another stock market crash first, and buy at lower levels, if it happens and if prices go lower.

Posted on 23 September 2010 Categories: Gold & Silver

31 Comments posted by readers:

Comment by Suren D’Souza - 23 September 2010

25 experts from LBMA forecast silver for 2010 as follows

Average low $ US 14.803
Average high $ US 23.542

Ed Note: $320-400 is a three to four year view – but this still gives another 10% in 2010.

Comment by Andy - 23 September 2010

So put aside $100K in silver and expect them to at least go 10 folds within a couple to a few years??

Comment by WiseInvestor - 23 September 2010

I’m not clear why the price of silver should correlate with gold. Surely the dynamics of gold as an inflation hedge and silver as an electronics component would expose them to different price pressures at different times?

Ed Note: Not if investors are buying silver and they are now a long with gold.

Comment by Bill Simpson in Slidell, LA. - 23 September 2010

Bill Fleckenstein was interviewed by telephone on CNBC’s Fast Money TV show. He said nearly all of the world’s paper money is junk. He said that he is buying gold & gold stocks. He said he is certain that gold will spike up, big time, but couldn’t predict exactly how long it will take. Should gold spike, so will silver.
Some other trader said that he expects gold to fall some, right after the US election, after the Republicans win the House. That is when you want to buy more gold, he said.
Some fellow on MarketWatch calculated that 7,000,000 houses will be thrown onto the US housing market as distressed sales, within the next few years. I think that could cause BIG problems for the entire financial system. Not to mention local governments, which depend on RE tax for funding.
I actually got my yearly RE tax lowered from $980 to $750, with a single sentence about an abandoned house, on a one page form. Was that easy. Is Saint Tammany a great Louisiana Parish (Louisiana was French Catholic & Spanish, hence, parishes instead of counties) or what! My total cost was 44 cents for the stamp. Gold won’t give you that kind of return on investment. Or maybe it will, if Ben goes crazy with the QE after the November election.
It is getting hard to keep up with all these problems! China just cut off shipments of ALL rare earth elements to Japan, until they release the fishing boat captain. Things are suddenly heating up between China and its’ neighbors. That ban will put some geologists and miners to work in the California and Nevada deserts. (Thank you China) It is now obvious, that you can’t depend on China for anything critical to your economy. They get mad at you, and they cut you off. So much for contracts. There are some things you just can’t do without the rare earths, which fortunately, aren’t really that rare, as I think the Chinese might soon discover.

Comment by obewon - 23 September 2010

A very worthwhile read, Peter! While no one knows for sure how high silver will go, I’m highly confident that it’s price will be many multiples of $20 within a few years.

@WiseInvestor:
I understand your point; but that’s what governments and their Central Banks want the public to believe, even though silver has been considered a precious metal for thousands of years.

Forensic Evidence Here:
There’s an excellent analysis of the precious metals prices that appeared yesterday in ZH; the gist of the author’s hypothesis was that his data provides more forensic proof that gold and silver prices are heavily manipulated on a daily basis. Go here for details:
http://www.zerohedge.com/article/guest-post-more-forensic-evidence-gold-silver-price-manipulation

There’s Another Message Here:
But there’s another message to be gleaned from that article. After sifting through Adrian Douglas’ statistical analysis (one of my undergraduate degrees was in Math, so I understand the importance and use of the “R squared” in statistical analysis), one comes to the realization that silver is not only an industrial metal, but it is also a precious metal, as is gold. . . (and coincidentally, silver is also a very important strategic metal, used for military purposes). Central Banks, governments and the world’s big banks know this truth, but they’ve succeeded in deluding the world into believing that silver’s only real use is as an industrial metal.

Fiat Currencies Need Gold and Silver Suppression:</b.
Using the so-called "investment banks" like JPM, GS, etc. as their agents, the Anglo-American axis of Central Banks have been wildly successful over many decades in price suppression, in order to discourage gold and silver investing; this has allowed them to perpetuate their debt-based, fiat currency scheme . . . but the jig is finally up.

Thanks in large part to the "truth-telling" capabilities of the Internet, investors are now a lot wiser, and they're moving their money into physical gold and silver . . . and the Central Banks are now petrified.

P.S. when money leaves the stock markets, these Central Banks want that money to flow into worthless mid-term Treasury bonds, not into gold and silver.

Comment by Bill Simpson in Slidell, LA. - 24 September 2010

I see a constant parade of gold mine CEOs on CNBC saying how gold is getting harder and harder to find. (Like it has ever been easy to find.) But it makes me wonder how much additional silver is out there in the ground, that might be mined if the price shot way up. Might that additional supply keep the price from going up as fast as some people think? They still mine silver in places in Mexico by hand. (I saw it on TV, so it must be true.) Big machines might be able to pull out a lot of additional silver. And Mexico will soon be running short of oil to export, so they might go after all they can find. Who knows?
And doesn’t most silver come as a byproduct from the mining of copper? What about gold from copper? What are the numbers?
We need some spies inside BHP and Ivanhoe. As an aside, someone just said that Mongolia contains huge deposits of copper, iron, and coal. China will like that.

Comment by John Mark - 04 October 2010

Much is said about needing “stomach” if you invest significantly in silver! The “stomach” problem can be reduced very greatly if you do NOT take delivery of the silver (or gold) AND if you monitor its price progress on the internet on a site, where you can sell at the click of a button.

I sold some gold on 9 June this year at £27.2147. I was lucky in choosing this day because that day was the peak for gold so far. In fact, I recorded £27.5747 that day, although the MSM keep telling us that gold has peaked again at £26.7 etc.

I was able to sell at this time, not only out of luck, but also because I sold at the click of a mouse button for gold that I had not taken delivery for.

I am confident that I can monitor silver volatility well and sell quickly if need be, so that I am not going to experience much of that “stomach” problem, which Peter refers to in his article. I make a written record each day of gold, silver and platinum prices so that I can see a prices trend for myself over the year. I look at prices whenever I feel like it during the day without writing anything further down.

Without the eDealer GoldMoney, all this would be impossible. I find that http://goldmoney.com/index.html?select_pcu=826 is less complicated to bullion vault and so it is my choice.

Comment by obewon - 04 October 2010

@ John Mark:
An experienced investor and chartist will be able to use techniques similar to what you described. However, as the price (and volatility) of precious metals continues to increase, charting techniques are more difficult to implement.

Eventually, investors who own no physical gold or silver will be “left out in the cold” as the price surges to higher and higher levels.

A related issue will be the price disparity between the physical metal and the paper price. As the gold prices continue to increase, the “paper” gold price will eventually drop, creating significant differences between the two price points. You can find some very useful papers written on this topic if you search the internet.

Comment by John Mark - 05 October 2010

Obewon, I don’t see myself as a chartist nor does my recording each day of the spot price mean that I am charting, I reckon. My “charting” relies on the financial/fiscal/monetary situation in the world so that, for example, today’s article in the DT that the world is, really and in fact, in depression, encourages me regarding precious metals.

ETFs perplex me but I understand that they were introduced by governments to reduce the number of people and the amounts invested in real gold. This would mean that, instead of governments closing down the bullion market as Roosevelt did, they have struck pre-emptively to reduce the amount of fiat currency disappearing into ingots.

Hopefully, as bloggers blog, people will increasingly wise-up to the fact that you can own gold and silver directly and not on paper by buying and selling it through these eDealers. That might reduce the volume of Externally Traded Funds over time.

How a widening gap between spot prices and ETF values occurs, I do not know. I suppose that more and more people take their monies as their ETFs match the spot price and don’t buy any more ETFs thereafter.

Comment by Stephanie - 09 November 2010

I need to point out that massive amounts of silver mined over the last 5,000 years have been used up irrecoverably in manufacturing processes in the last 60 years or more. What is the possibility that there is now 2 or 3 times as much silver as gold now? One to one? Less than one?

Here’s another thing, and I’ll keep saying it – the I-1099 requirement to become effective in 2012… A provision in the health care bill known as Section 9006. How will this affect gold and silver prices when it becomes apparent that sellers of any amount of gold over $600 will have to be reported to the IRS? That form IDs you, the seller and the coin shop, the buyer. You will not be able to sell a SINGLE ounce of gold from 2012 on without being noticed. The reason this form will then be required is to find out who has gold, and not only tax it, but also find out who the major gold holders are so that the IRS can conduct confiscation operations. They know from last time that quite a bit of gold remained in private hands in spite of the threat of punishment. This means, that to avoid this fate in January 2012, gold holders will attempt to sell out of gold into silver only to bid up silver well over $600/oz. When that happens, people will then get out of their larger silver bars into junk silver in order to stay under the radar for silver sales/purchases.

Silver would have to approach:

$840/oz for a silver dollar;
$1,640/oz for a silver half dollar;
$3361/oz for a silver quarter;
and $8,391/oz for a silver dime for the IRS to take notice of your transaction.

I’ve positioned myself accordingly. Already, two attempts have been made to repeal this provision hidden in the health care bill that passed. FAIL. I’m of the opinion that things are so screwed up that this provision will not get repealed, and a revolution will become required.

Comment by Dean Hodgson - 11 November 2010

That’s extremely interesting. I’m sure if that was more widely known, the price of silver would climb closer to it’s historical high a lot quicker. I have been following the price of silver and gold for the past year and a half and silver has clearly out-performed gold as it has well over doubled since october 2009. Gold was at approximately 16,000 UK Pounds at this time and has not yet doubled.

Also, since then, Palladium has pretty much trebled and platinum has also performed not far behind. This clearly shows that the price of gold and silver has been manipulated and suppressed. . . up until recently. We are beginning to see the pressure being released and I also believe this could be seen the calm before the storm when we look back at this time a couple of years from now.

It is still well worth investing in Gold and Silver as I believe the prices are still extremely low in correlation to where they should be right now. This is one boat you do not want to miss. In terms of investment, I don’t think there is a better time to invest. At the very least, I do not believe that prices can drop and you will certainly make more interest than putting your money into a high interest account or ISA.

Its exciting times for those who own silver. My advise is do not worry about slight drops in the price. From what I have observed, the price seems to take one step back and three steps forward.

Comment by Dean Hodgson - 11 November 2010

*Typo, the prices I am referring toin my last post are for 2008 and not 2009.

Comment by boatman - 27 March 2011

the US 1099 tax form for buying materials hidden in healthscare bill is TOAST……take that worry away!!!

Comment by Stephanie - 28 March 2011

Indeed, both the House and the Senate passed their versions of the repeal bills, but they are not the same bill, so both groups must negotiate the differences. There is also the matter of where to come up with the $20 billion lost from the repeal of this provision. Before this provision’s repeal can be finalized, it must be agreed upon as to where the now-missing revenue will come from. Until that is done, the provision is still on the books and the money must come from somewhere.

That’s the problem – Congress can’t put this one to bed unless they can come up with a way to make up for the missing revenue. This is stupid…

Comment by Eric - 28 March 2011

Very Very interesting read , thank you all for the info…

I think its fair to say that I’ve just shifted my gears from gold into silver.

Comment by obewon - 28 March 2011

@ Stephanie: Great update on what the jackals in DC are doing.
tnks.

P.S. Isn’t it interesting how the Administration & US Congress can’t seem to find any way to cut 3% or 4% of the budget, yet they come up with all kinds of ideas to add stealth taxes here and there. I’ll bet most Americans are unaware of the new 4% tax on their homes, if they try to sell it after next year (for those who don’t know, this new “stealth tax” was inserted into the ObamaCare Bill).

Comment by John McIntosh - 28 March 2011

There are plenty of people working and thinking along the same lines.
I have spent 18 months educating myself and being told I’m nuts and that gold and silver are just metal you can’t eat. They stopped talking about it several months ago.

I recommend “The Dollar Meltdown” by Goyette. It really is a good idea to get 10-20% in real silver but I have kept the rest in ETF’s AGQ and HZU:CA (Canadian$ account). I buy through Tulving Company and highly recommend them. I did Canadian silver maples and 100oz bars. I’ts been a one year turkey shoot and I think it will get much better re Stephanie but more importantly Ben will keep printing and the brilliant minds of CNBC will keep talking about economic growth when the correct term is INFLATION.

It is all going to crash at some point and I expect g/s to drop as well but after that Ben will add a few more shifts to the press gang and then the inflation should go on a really wild ride.

None of this is good for the country but we have to save ourselves and families and gold/silver is the best way I’ve found. Eventually I’m going back into Canadian oils and high interest bonds. Right now bonds are death to capital and I strongly recommend everyone ditch every bond and US $ you have.

Comment by Joshua Gavina - 29 March 2011

I can handle the volatility of silver. If it goes up, I’m making money. In the case silver goes down, I can buy more silver!

Comment by jonsems - 02 April 2011

Hey Stephanie,

Plagiarism isn’t funny – there are a lot of real good investors and well read people = you did not write that- that should be pulled from the comments like the amounts and gold and IRS and 2012 and the 1099 not your work – you need to give credit where its is due – pull your comment give credit or or face the repercussions.

Ed Note: comments should be interesting they do not need to be original and proving the provenance of ideas is virtually impossible.

Comment by Stephanie - 02 April 2011

Dude Jon…

The 1099 provision and the missing money is a matter of public record. We the people are the government, we voted it in. It’s out there if you google it.

That there might be less silver than there is gold could be a matter of conjecture and not fact… But I believe that this is the case given the works I have studied. You know where to pull this information. Do I need to give credit to a source when I say, “Historically, Honda seems to have made better-quality cars than Ford was ever able to make.” It is a given, which applies to those of us who “know” about the silver deficit in mining and manufacturing. Anybody who has done enough research knows where the information comes from – it ultimately leads back to Ted Butler. Surely, you knew that.

The numbers on the silver pieces, I calculated myself using the simple rule of 1 troy ounce equaling 14 dimes or a dollar face of silver equal to 1.4 silver dollars, or a silver dollar equaling .715 troy ounces to figure in the calculation of what the maximum value of silver would have to be before the IRS notices the transaction.

The thing about what would happen with gold holders and the switch to silver, should we fail to fix our stupid mistake of not reading the Health Care Bill in its entirety before voting on it in time to prevent this rush into silver, is easy to arrive at if you know how humans work.

Dude, this ain’t college, I am not a professional journalist, a scientist, nor a financial professional.

Comment by obewon - 02 April 2011

@ jonsems:

I find no fault in Stephanie’s remarks. She was merely trying to educate the masses, most of whom do not understand what the US government & US FED are doing as it pertains to money & credit.

Example Here:
In a similar vein, most Americans are totally unaware of the fact that the ObamaCare bill that was passed in 2010 has a provision that requires a homeowner to pay “a new 3.9% tax” to the federal government when they sell their home. Everywhere one looks, the federal government, state governments, and city governments are adding “stealth taxes”, rather than cut their cherished social programs.

P.S. Ed: nice to see that this commentary still has some life in it.

Americans should spend less time watching Survivor & American Idol, and more time reading about stuff that is destroying their standard of living.

Comment by obewon - 03 April 2011

@ Stephanie, The Journalist:
Perhaps you’re not a journalist, as you stated in your remarks . . . but you latest commentary nailed it!

Comment by STK - 18 April 2011

I am slowly adding to my holdings of silver coins. I have recently bought the American Silver Eagles. I haggled about the price from the dealer and somehow got a price just a few cents above spot. Too good to be true. We have some old Morgans too but I focus primarily on the bullion value rather than rarity because when push comes to shove that might be all you get. In any event, with quadrillion dollar deficits hanging around like storm clouds anyone who invests in the stock market is living in a fool’s paradise.

Comment by Lester - 18 April 2011

Got to love that innocence: “we the people are the government…”

Wake up and smell the fumes from DC!

Comment by Francis Bart Bertholic - 19 April 2011

I’m so glad to see silver on the rise

Comment by Lin kobsey - 19 April 2011

Both gold and silver are commodities such as corn, wheat, copper, coffee and most other commodities and oil. The only difference between precious metals and other commodities is hoarding. Definitely, precious metals are important, most soverign nation have a gold hoard. The more developed nations have hoarded gold since the 1850s and before that. In a batering condition there is ratio of how much precious metals can be exchanged for other commodities, at least at the moment. Silver’s ratio has been been about 4 oz of silver to 1 bbl of WTI oil. Gold’s ratio has been 10 bbl of oil to one oz. of gold. ArabianMoney forcast of silver of $320 means one could then buy a bbl of oil for less than a 1/2 oz of silver in today’s market. At $5000 gold, one oz could buy nearly 50 bbl of oil in today’s market. Given this forecast on PM, oil price would have to rise to over $1200 a bbl by the silver ratio or $500 a bbl by gold’s ratio. Is this concept plausible given the forecast by the Saudi’s, they want to see oil at between $75 and $85 a bbl.
I smell tulip bulbs or God (missing “l”) bless us all, we will need it.

Ed Note: $75-85? And where is the price today? They bank oil revenues but cannot set the price! But your point is correct that higher precious metal prices will come with much higher energy prices. This will break the global economic recovery and put us back into recession. Most asset prices will tumble again but commodities will stay relatively high, particularly gold and silver as a money that cannot be printed.

Comment by obewon - 19 April 2011

**** Enters this ol’ thread again ****

Nice to see that, after about 7 months, this commentary still has “legs”

Comment by Shiva - 25 April 2011

what would be the silver price in next 1 month and I plaaning to buy silver…Please advise me on this…thanks for the reply..

Ed Note: Subscribe to our newsletter for a more in-depth approach with guidelines on timing.

Comment by SUPERMAN - 13 December 2011

Silver and Gold are being manipulated. Investing in silver and/or gold expect to hold for 5-20 years. All I see in 2012 is gold @$2,075-$2,200 average and silver @$38-40 spiking into $55-60 but average down again in 2012. Nothing spectacular, Guy writing this article saying $320 Oz for silver is smoking Arabian Crack. I could see $100-175 by 2015, but thats all folks!

Comment by Stephanie - 13 December 2011

Superman, don’t forget about MF Global’s bankruptcy (8th largest in US history) and how that might affect the silver and gold futures market as far as hypothecation and rehypothecation of assets is concerned. That might throw your prediction out, and mine as well ($30-50 range until May 2013, when it MIGHT get out above this range on a permanent basis).

Comment by obewon - 13 December 2011

*** Enters Thread Again ***
Nice to see that this thread is still alive, Peter!

@Superman:
Fortunately, a growing number of folks around the world realize that gold and silver are being manipulated; but only a few of those folks know PRECISELY why.

The Price in 2015?
Your price points for 2012 gold/silver may be a little low, but no one really knows at this point. Regarding your estimate for silver in 2015, even if the silver price is “only” $130, that fantastic increase represents the very best investment that one could make; this is especially true when one considers the fact that:
a) the western stock markets will be collapsing over the next few years,
b) paper currencies are, and will continue to be heavily devalued, and
c) the bond markets of the world will produce negative returns annually.

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