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Silver – Eight Years Later Eight years ago, silver reached $48 per ounce. COMEX changed the margin requirements, and others dumped thousands of paper contracts on the COMEX market to smash prices lower. They succeeded, as usual. Old news! As they say, “Wash, rinse and repeat.” Gold and silver prices fell hard since their 2011 highs, while central banks levitated the S&P 500 Index, most stocks, and bonds with massive infusions of cheap debt. Central banks also purchased stocks and bonds. Inexpensive debt, QE, and bond monetization were good for the DOW and S&P 500 stocks. Central banks are reluctant to change policies, but the world may have arrived at another “Peak Debt” moment similar to 2008. What are prospects for silver and gold in the next several years? What data backs up the prognosis? BACKGROUND:
President Nixon severed the dollar’s last link to gold in 1971. In 48 years, the S&P 500 Index, gold and silver rose exponentially. Examine their charts based on weekly data. Because silver often moves opposite to the S&P 500 index, the sum of silver (times 100) and the S&P creates a narrower exponential channel. Review:
The Big Question: Where are the markets now and what can we expect?
Negative interest rates exist for over $10 trillion in sovereign debt. (Crazy!) Huge student loans defaults. (No happy ending here.) Retail apocalypse, declining sales and stores closing. Excessive individual and corporate debt. Weaker auto and house sales etc.
SO WHAT?If the party is over, and if conditions reverse this year, the stock market could fall while gold and silver spike higher. What does the silver to S&P 500 ratio show? Silver prices are too low compared to the S&P 500 index, as they were 18 years ago before silver rallied from $4 to nearly $50. Could silver prices rise by a factor of ten during the next five—ten years?Yes! Will overall debt rise? Will congress persist with economically ignorant and corrupt policies? Will the Federal Reserve monetize debt via QE to infinity? Will gravity finally overwhelm stock market levitation effects from QE and derivative purchases? And the list goes on… Bet on flat to lower S&P 500 Index and much higher silver prices during the next five years. HOW HIGH?
SILVER VERSUS GOLD?Examine the weekly silver to gold ratio chart. It shows that silver is undervalued compared to gold. When worries arise about national and corporate insolvency, loss of confidence, a credit crunch, hyper-inflation, or a currency crisis, silver will spike higher. Read: Gary Christenson: Trade the Gold to Silver Ratio David Schectman: Central Banks are Buying Gold Listen: Andy Schectman: Silver is an Investment Opportunity of a Generation GoldCore: Silver Bullion Set to Soar to $50 CONCLUSIONS:
Miles Franklin (1-800-822-8080) will recycle debt-based fiat dollars and convert them to silver and gold. China and Russia purchased large quantities of gold because they prefer gold to devaluing dollars. Central banks are buying gold. Follow what they do, not what they say. Encouraging everyone to stack silver… Gary Christenson The Deviant Investor
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