Silver Prices Could Be Setting up to Skyrocket
If you are not looking at silver prices, you could be making a big mistake. The gray precious metal could be set for a colossal rally in 2021 and beyond.
Forget everything else and just look at silver valuations. Silver seems to be trading for pennies on the dollar. It could be the next big trade in the making.
Look at the chart below for some perspective. It plots the gold-to-silver ratio. Essentially, this ratio tells us how many ounces of silver it takes to buy an ounce of gold. For long-term Lombardi’s Letter readers, this shouldn’t be a new type of chart; it has been presented here before.
If the gold-to-silver ratio is above 80, silver is considered to be undervalued. If the ratio is below 40, then the gray precious metal is deemed to be overvalued.
Chart courtesy of StockCharts.com
Over the past 35 years, the gold-to-silver ratio has pretty much done one thing over and over again: once it crosses above 80, it almost always makes its way back down to 40 (and in some cases below 40).
Not too long ago, the gold-to-silver ratio crossed above 100, suggesting that silver is selling at dirt-cheap prices, relative to gold. That ratio has started to trend lower, and one must wonder if it will drop to 40.
Why $75-per-Ounce Silver Could Be Possible
Assuming gold prices don’t change at all (around $1,840 per ounce at the moment), for the gold-to-silver ratio to get to 40, silver prices would have to be around $46.00 per ounce. Currently, the gray precious metal trades around $24.00 per ounce. This means the price of silver could surge by 91.7%.
But it would be slightly childish to assume that gold prices are going to remain the same.
You see, central banks around the world have been making a very strong case for owning the yellow precious metal. Even the big banks that didn’t really like the metal, almost all of them seem to be in favor of owning it now. So it’s likely that gold won’t remain at $1,840 for too long. I’ve even seen targets for gold as high as $3,000 per ounce.
Assuming gold prices run that high ($3,000) and assuming that the gold-to-silver ratio drops to 40, for that to happen, the gray precious metal would have to be around $75.00 per ounce!
Silver Is Presenting a Rare Opportunity
Dear reader, very rarely do you find opportunities like this.
As I see it, silver seems to be a no-brainer trade. The upside could be huge. If the price of silver makes a run for $75.00 per ounce, it would mean an increase of 212%.
Do I think it will happen in an instant? Not at all. For silver to rise that high, it could take some time. However, I think if silver prices hit $50.00 per ounce, the move to $75.00 would be much faster. In fact, I believe that, above the $50.00 level, there could be fireworks in the silver market.
Now, imagine what will happen to silver company stocks that are still being disregarded. A large number of them continue to sell for pennies on the dollar. If silver prices surge by 212%, it’s possible that shares of silver companies will also surge immensely.
Going into 2021, I believe silver could be one of the best-performing assets—it could outperform the stock market by a massive margin. It’s not getting attention at the moment, but those who are patient could reap big rewards.