Numbers That Show Silver Prices Are Headed Higher [iShares Silver Trust (ETF), ProShares UltraShort Silver (ETF)]

June 1, 2015 2:36pm NYSE:PSLV NYSE:SLV

silver pricesPeter Krauth: Knowing how to buy silver lets you take advantage of great silver buying opportunities – like the one we have now.


Silver prices have been in the doghouse for some time. After peaking at $49 in April 2011, the precious metal has given back 66%. It’s been flagging around the current $16 range for the past seven months.

But a couple of key indicators show the price of silver is both cheap and could be set to rocket higher.

To make sure you get a piece of the profits, we put together these steps on how to buy silver today…

Silver Prices Headed Higher – Just Look at These Numbers

First, let’s take a look at why silver prices are headed higher.

To understand the value of silver, you have to look at gold. Gold’s bull market started back in 2001 from a bottom of $256. It eventually peaked in 2011 at about $1,900, for a 642% gain.

Silver bottomed at $4.15 in 2001, then peaked in 2011 at $49, having gained 1,080%. So, from trough to peak, silver’s gain was nearly twice that of gold’s.

While that leverage looks exciting, investors still need to heed the inherent risks and recognize it’s a double-edged sword.

Since those highs, gold has retreated 37%, while silver’s off by 66%. Again, that nearly 2:1 magnification shows these while silver typically follows gold’s price movements, silver is more volatile.

Because silver and gold are highly correlated, one useful tool to gauge silver’s price relative to gold’s is the gold/silver ratio.

how to buy silver

We calculate this indicator by dividing the gold price by the silver price, which currently yields about 72. That means right now an ounce of gold will buy roughly 72 ounces of silver.

Historically, that ratio has been closer to about 16. On that basis, silver is still very cheap.

If we look at the gold/silver ratio since the current bull market began in 2001, it averaged closer to 55 before the 2008 financial crisis and stock market panic.

As this bull market progresses, I believe the gold/silver ratio will not only return to its pre-panic average of 55, but will ultimately peak somewhere closer to 20.

What does that mean right now?

Well, if gold were to stay at $1,200, and the ratio returned to 55, then silver would climb by about 33% to around $22/ounce.

However, I predict gold will climb to about $1,400 by the end of this year. So at a ratio of 55, silver would reach $25.50. That’s 55% higher than today’s $16.50.

With silver prices headed higher, now’s a great time to add silver to your portfolio. Here are a few ways to do it…

How to Buy Silver Today

How to Buy Silver Coins: Because silver is so much cheaper than gold on a per-ounce basis, a single coin is within everyone’s reach. Coins typically come in 1-oz. sizes. The Silver American Eagle (0.999 fineness) currently sells for about $20, and the Canadian Silver Maple Leaf (0.9999 fineness) sells for a similar price to its American counterpart.

How to Buy Silver Bars: Buying silver in bar form will get you more silver for your money. Silver bars are available in a number of sizes. Try to stick to recognized “Good Delivery List” bars, which will be easier to sell and bring top dollar should you do so. “Good Delivery” bars are produced by refiners such as Johnson Matthey, Heraeus, Engelhard, and the Royal Canadian Mint. Here are the current going prices: $18.70 for 1 oz., $92.50 for 5 oz., $185 for 10 oz., and $1,750 for a 100-oz. bar.

How to Buy a Silver ETF: If you want to take the plunge but you just don’t want to deal with physical silver, consider the Sprott Physical Silver Trust (NYSE Arca: PSLV). It holds silver bullion that is fully allocated and stored at a secure third-party location in Canada, subject to periodic inspection and audits.

Right now, PSLV trades at a small -0.66% discount to net asset value. That translates to about $16.50 per ounce of silver versus $20 for a Silver Eagle, providing a savings of $3.50 per ounce.

If you want to buy silver, don’t wait. Silver is a small market, and premiums can explode higher when buying ramps up.

Money MorningWritten By Peter Krauth From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet.And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.


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