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

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.

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