Don’t Forget About Silver: Possibly the Bargain of the Century
As Peter Schiff said in his most recent Gold Videocast highlighting the gold breakout, “$1,310 is still a low price for gold relative to where it is going. And of course, silver is an even better buy.”
In fact, silver is tremendously undervalued. In July, Peter pointed out the huge spread in the silver-gold ratio, which currently stands at over 75:1. This means you can buy almost 80 ounces of silver with one ounce of gold. Consider that the historic average ratio is around 16:1.
So, the fact that you can buy 80 ounces of silver for one ounce of gold is an incredible buying opportunity. This is silver on sale. It’s one of the greatest silver sales of all time, relative to the price of gold.”
On top of the fact that silver is undervalued, fundamentals point to a bullish future for the white metal.
A recent article in Seeking Alpha takes a different analytical approach and also concludes now is a great time to buy silver. It looks at silver relative to the US dollar and confirms the white metal is extremely undervalued.
Silver is currently trading around $17 an ounce. This is around 34% of its 1980 all-time high of $50. However, this is an incomplete representation of what silver is really trading at, relative to US dollars. When you look at the silver price, relative to US currency (the amount of actual US dollars) in existence, then it is at its lowest value it has ever been.”
The analysis compares the price of silver relative to the monetary base. This effectively measures currency debasement. When you look at the numbers, the currency is now at its most debased level over the last 100 years.
With all the excess dollars out there, the market will eventually seek an equilibrium, which means that silver will spike in price relative to the US monetary base, as it did in the late 70s.”
If you take the all-time high in 1980 and compare it with today’s low of 0.0004, the math reveals that if the price of silver was currently at that 1980 level, it would be over $1,400.
So, in terms of US dollars in existence, silver is trading at 1.19% (17/1424) of its 1980 high – it is the bargain of the century.”
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