Nothing dramatic has occurred in the past week. No earthquakes, no disasters, no financial meltdowns: in short nothing unusual.
So that means that the U.S. dollar continues to move down, the Federal Reserve continues to print money, the populace continues to be fooled by the pretense that politicians really want to reduce the deficit. More lies and no real action.
But what has me doing research and calling my trader friends around the globe is silver.
I do expect the price (in dollars) to go higher for gold and silver as the dollar depreciates.
Historically, gold has been an asset that people turn to when they want to hedge against inflation. Gold has shown itself to be a great storage of wealth for centuries.
What has also been known is that the price ratio of gold to silver has been 20 to 1. This means that gold has traditionally been 20 times the price of silver.
So if gold is valued at $1,500 per ounce, silver should be at about $75 per ounce. And currently silver trades at about $45 per ounce.
If history is a good indicator of future pricing, and in a long-term scenario, it has stood the test of time, we should see the pricing between gold and silver come back to the 20-to-1 ratio.
Currently at $1,500 on gold, silver should be priced at $75 per ounce. And if we value gold in the terms of silver, we should see gold at $900 per ounce.
So the current pricing is out of sync. So in long-term historical comparisons, silver isn’t in a bubble and could actually have a lot more room to appreciate.
In reality, I believe that gold will slide back a bit and silver will appreciate more to reach equilibrium, with gold at $1,350 and silver at $60 an ounce. But that is my guess and hunch, not a scientific analysis.
I do believe that gold and silver have entered into a new pricing range given the excessive instability around the globe, the high inflation existing in Asia, the rising inflation in the West, the frustration of the investment community watching the dollar in a continual spiral downward and the incredible arrogance of the politicians in D.C., who don’t want to bring the deficit under control.
I continue to keep between 15 percent to 20 percent of my investable cash in gold and silver and tweak my investments as the values change.
And I strongly recommend you consider the same kind of diversification in your portfolio as well.
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