Profit from the Silver Spike of 2016

Written By Christian DeHaemer

Posted June 27, 2016

Silver is a volatile beast, a scabby snake.

It moves like a sidewinder on Adderall — that is, silver won’t flow in a straight line, but it is laser focused on where it has to go.

And it’s going up.

The last major bull market for silver (prior to 2009–2011) was in the 1970s.

In the decade of disco, the price of silver climbed from $1.25 to $43.

That’s a heck of a run. No wonder men on the make wore those heavy chains displayed prominently to entice the lusting females. There were not many young girls who could resist the enchantment of silver as it went up 3,440%. There are few who can resist it now.

But as I said, silver did not rise in a straight line. Trees don’t grow to the sky, and investments are fraught with dangerous corrections…

Buying the Dips Pays Off

From 1970 to 1981, there were more than 10 corrections where silver fell in excess of 10%.

Three times it declined more than 20%, and once, in 1975, the price of silver fell more than 50%.

But in 1976 it went right back up, recovering all of its losses to $6 on its way to $43 five years later.

That’s how silver trades.

More recently, as you can see by this five-year chart, silver jumped from under $10 in 2008 to all-time highs near $50 in 2011:


That type of rise was naturally accompanied by profit taking.

A 400% return is a good run by anyone’s standards, and it makes sense that it has come back to support.

Over the past year, we have hit that support and bounced off it. The downtrend is now broken, and silver is going back up in price.

Gold-to-Silver Ratio

Another bullish sign for silver prices is the gold-to-silver ratio. When Rome ruled the world, the g/s ratio was set at 12 to one. One piece of gold was equal to 12 pieces of silver.

In 1792 the g/s ratio in the United States was fixed by law at 15 to one. Today the g/s ratio is at 74. That means gold is expensive and silver is cheap in comparison. And in the aftermath of the Brexit vote, both will get more expensive. It is just that silver has a lot more upside.

You see, four times in the last 30 years, the gold-to-silver ratio has dropped below $80. Each time that happened, the price of silver went on a major bull run.

Gold-to-Silver Ratio Drops Below $80:

And it is happening again right now. It means silver is stretched like a slingshot and the higher in price gold goes, the more it is stretched. At some point, silver will come flying back to the average gold-to-silver ratio of around 50. So if gold doubles, silver will go up much higher.

Right now gold is around $1,300. The gold-to-silver ratio is at 75, which means silver is at $17.33.

If gold doubles like many people think to $2,800/oz. and the ratio remains the same, then silver will be at $34.66/oz. If you owned silver, you’d have doubled your money.

But given our historical analysis, it is more likely that the g/s ratio will drop to 50. This would put the price of silver at $52/oz., which means for the same long precious metals bet, you would have tripled your money.

And by all means, that’s a great investment. I encourage you to buy some silver today.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.

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