Thursday, October 25, 2012
Silver Will Outperform Gold Going Forward
Gold and silver will continue to be a safety hedge in regard to inflation and a place of safety, as out-of-control governments continue spending and central banks continue to feed their addiction.
Contrary to any political leader today, with the exception of Ron Paul, there is no will to deal out the medicine that would be needed to halt American and other nations from going off the fiscal cliff.
There are some emerging in the Tea Party movement, but I think there it'll take some years before they are trained enough in economics (assuming they understand the need) to be able to make the right decisions for America over the long term.
They have the instincts right concerning slashing government spending and reducing the size of government, but there still a need for them to learn that the Federal Reserve must be abolished or there will never be an end to the hellish practices that are economically destroying the nation.
The Federal Reserve is the rich uncle enabling the irresponsible child to continue on in their ways. Only cutting him off will do the job, but the rich uncle has basically destroyed the child be making him dependent upon his for sustenance. That's the case today with America and other countries that have given out government promises of economic security and protection, with central banks financing them as the main economic growth engine of these countries.
All of that is falling apart, as evidenced by Europe, and it will spread everywhere that those unsustainable practices are employed.
Now as far as all this relates to gold and silver, gold is primarily the hedge that is used by knowledgeable investors to protect their assets against this government and central bank folly, with silver its weak cousin throughout a lot of history.
While gold will continue to rise up over time, as there will be no real steps taken to stem the tide of government promises. As already has been shown, people will rise up - most times violently - in response to what they have been socialized and trained into believing is their right, when it is no longer available to them, silver will rise up even more.
I say this because historically, the ratio between gold and silver has been at about 16. In other words, it would take sixteen ounces of silver to buy one ounce of gold.
So where gold prices stand today, at about $1,725 an ounce, the price of silver should be at somewhere about $108 an ounce. But it has been hovering around $32 an ounce instead. That makes the gold-silver-ratio about 54 today.
The fact that silver has more than doubled from $15 an ounce three years ago to over $31 an ounce today, points to the fact that investors are seeing the unfolding currency crisis, which only hard assets like gold and silver can protect against.
Historically, the price movement of silver usually soars when a currency crisis emerges, and it will outperform the price of gold. At least that's the usual practice. And while silver hasn't outperformed gold over the last decade, the hefty price movement of gold will keep it from moving up in the way it has over the last ten years, as measured by percentages. Silver, on the other hand, is poised to soar, which will bring it back closer to the historical ratio it has usually enjoyed.
This has happened several times since World War I, and will surely do the same over the next several years, and maybe out as far as a decade. A number of commodity and silver experts see silver as being among the best asset classes to own over the next ten years.
There is no certainty as to when gold will breach the $2,000 an ounce mark, but when it does, and as silver moves towards its historic ratio of 16, we could see silver at $125 an ounce. And as gold prices move higher, silver will ultimately adjust and go upwards with it.
All of this of course assumes the current practices of the central banks and governments continue. There is nothing in the near term that would suggest it will change in any way for years to come. Hi-Ho Silver!