Silver up 40% This Year – Just The Beginning?

Silver had another strong day on Friday, up another 5.3%.  That takes silver up 40% for the year and the gold silver ratio down to 68 from its highs of 84 only a few months ago.  So the big question is…. is it time to take profits or just the beginning?  For the record, no one, including us, knows.  But let’s look at some facts.

The last big market high was in April 2011 when it hit USD48.70 or AUD44.50.  As you can tell from this pairing, our AUD was worth MORE than the USD.  The chart below shows the bear run silver investors have endured up to the end of last year.  That was a lot more difficult for US investors than Aussies, as our dollar slid down to 60’s and now 70’s buffering out a lot of those falls.

As you can see from the chart below we are in a clear upswing now and whilst those who bought at the beginning of this year are seeing 40% gains, older investors know that we are still seeing relatively cheap prices.  A 40% gain is ‘easy’ when coming off such a low base.

If you had sold or stopped buying in late 2008 after a similar 40% gain to that just experienced, you would have missed out on another 280% gain.

The other key thing to note is that from that low in late 2008 the gold silver ratio went from mid 70’s as we’ve just seen down to just 32 at the peak of the silver price in April 2011.  If you were to apply the same move in the gold silver ratio to today’s $26.45 silver & $1797 gold price you would see $57 silver with no change in the gold price from here.  That alone is another 116% gain and remember gold is currently on the rise too, not stagnant.

So we currently have 3 dynamics at play.  We have a technical setup indicating more gains for gold (and silver) to come, we have a gold silver ratio still 116% over it previous lows and tracking lower (lower means higher silver price), and we have an Aussie dollar still up around 74c with many economists predicting 60’s and even 50’s.  We are also still less than half the previous high.

Now we all know the road in any bull market can be a rough one (that’s why it’s called bull not train), but history indicates there is still plenty of potential from here…