by Steven St. Angelo, SRS Rocco:
That’s correct. Going by the historic Dow Jones-Silver ratio, it points to $300 silver. This may seem outlandish or a play on hype, but it isn’t. While many precious metals analysts have forecasted high three-digit silver prices, I didn’t pay much attention to them. However, after I looked over all the data, $300 silver is not a crazy figure at all.
Let me explain. The U.S. economy suffered a fatal blow in the 1970’s as its domestic oil production peaked and inflation soared. To protect against the ravages of inflation, investors moved into gold and silver in a big way. Yes, it’s true that the Hunts bought a lot of silver during the 1970’s, but who was buying gold to push its price to $850 in 1980 versus $35 in 1970. Furthermore, who was buying oil to push its price up to $36 in 1980 from $1.80 in 1970??
As U.S. oil production and the EROI- Energy Returned On Invested continued to decline in the following decades, the American economy transitioned away from a high-paying manufacturing economy to what I call a LEECH & SPEND SERVICE ECONOMY. Thus, each new decade brought about a new bubble to keep the facade of a growing economy alive.
We had the Department of Defense Military spending Bubble in the 1980’s, the Tech Bubble of the 1990’s, the Housing Bubble of the 2000’s and now we have the Auto, Housing, College, HealthCare, Stock Market, Retirement and U.S. Treasury Bubble. The present highly-leveraged bubble will end all bubbles.
Short Term Silver Market Analysts Can’t See The Forest For The Trees
I wrote about this in my recent article, Precious Metals Investor: Must See Important Charts & Data,
Unfortunately, Mr. Weiner’s gold-silver basis charting analysis wont put food on the table when the complex supply chain system disintegrates due to the collapse of U.S. energy production. However, owning physical gold and silver at this time could help considerably.
Mr Keith Weiner and Dan Norcini both view the precious metals with blinders on. I would imagine both of these trading analysts have no idea of the future negative impacts of the energy market or the ramifications of the Falling EROI – Energy Returned On Invested. Thus, they continue to make short-term forecasts as if the world will continue to grow for the next century.
Unfortunately, most Americans have their wealth tied into financial products that have no future. Furthermore, the Auto & Real Estate Market will crash to a level that will take the breath away from even the most bearish analysts. Thus, there will be very few worthy physical assets to own at this time. The two physical assets I value the most are gold and silver.
The Historic Dow Jones-Silver Ratio Points To $300 Silver
If we look at the the Dow Jones-Silver chart, we can see we are no where close to the 25/1 ratio of 1980:
You really can’t see the 25/1 Dow Jones-Silver ratio in 1980 as it is a small blip on the bottom left-hand portion of the chart. In Feb 1980, the Dow Jones traded at 865 points while silver traded at $35. Can you imagine that??? The Dow Jones Industrials trading at 865 points?
Then when silver reached a high of $49 in April 2011, the Dow Jones-Silver ratio fell to 250/1 from a high of 2,500/1 in June 2001. Note: I am using round numbers here showing the Dow Jones-Silver ratio. So, from 1980 to 2001, the Dow Jones-Silver ratio increased 100 times from 25/1 to 2,500/1. Then it fell 10 times to 250/1 in 2011. Currently, the Dow Jones-Silver ratio is 1,015/1.
We all know the broader markets are being propped up by the Fed and U.S. Government Plunge Protection Team. However, at some point the markets will finally resume their crash lower. If we assume that Dow Jones falls to 7,000 points, a 25/1 Dow Jones-Silver ratio would suggest a $300 silver price (rounded figure).
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