2013 Silver Price Forecast: Silver Will Perform Like Gold on Steroids

[stu2002]

Peter Krauth


This past March, I asked a highly successful investment advisor what he thought about gold. Since he deals almost exclusively with very high net-worth individuals, his point of view was especially intriguing.

He confided to me that many of his clients had been asking for gold and gold-related investments over the past few years. I can't say that I was surprised.

But what he told me next simply shocked me.

"Gold's much too volatile, it's too risky", he said. "Sure it's up, but I try to discourage my clients from investing in it."

It simply floored me that he thought gold was too volatile. Gold is only up 580% since it bottomed in 2001, without a single losing year to date.

That's not something you can say about the stock market or any other type of investment.

I can hardly imagine what he must think of silver, as silver prices are up by 725% since 2001.

Today, silver is trading around $34, but our 2013 silver price forecast now has the shiny metal going much, much higher.

What will power that rise?

Since it's slaved to its richer cousin, all the fundamentals for higher gold would apply.

I wrote about them yesterday in my 2013 gold price forecast.

As history has shown, silver moves almost in sync with gold, but exaggerates its movements, both on the up and down sides. That's why I like to think of silver as "gold on steroids".

2013 Silver Price Forecast
For 2013 I think silver, like gold, will set a new all-time nominal price record, likely reaching as high as $54 an ounce.


Despite silver's dependency on gold, it does have some distinct fundamentals, too.

In fact, here are my key drivers for silver prices in 2013:
The Gold/Silver Ratio: Before the financial crisis, the gold/silver ratio was around 50 (meaning an ounce of gold would buy you 50 ounces of silver) and trending downward. In late April last year silver exploded higher, pushing the ratio down below 30.


That was short-lived, as silver's dramatic rise was unsustainable. I had said so at the time. The ratio recently returned to a high level near 60. In 2013, look for the ratio to head back down again, meaning silver will rise faster than gold.

On a long-term basis, I think we'll see this ratio move down closer to 20. So right now, silver is looking rather undervalued relative to gold.



Four More Years of Obama: The President has been very good for silver prices. In fact, he was so good, he helped make silver the best-performing major financial asset during his first term.


Now that Obama has earned another four years, and Federal Reserve Chairman Ben Bernanke's still in place and relying heavily on the printing press, I'm fully expecting a repeat performance. Thanks, guys, for more of the same.

More:

http://www.silverbearcafe.com/privat.../steroids.html

[Steven Douglas]

The 2013 forecast high of $54 would be a ratio of 31:1 if gold stayed the same, which it won't. Even with volatility, gold will never again go below $1600--it's a new kind of petrodollar for some, too many global players actively vying for it, and too much activist currency debasement for it to go anything but up.

20:1 at today's gold price would put silver at $85/oz. - a difference split between that and the project high wouldn't surprise me at all, $60-$65, with $48-$52 the new floor. Very soon.

[Seraphim]

I agree with the general thought.

2013 is the turning. In EVERY sense.

A 26,000 year turning....

The 2013 forecast high of $54 would be a ratio of 31:1 if gold stayed the same, which it won't. Even with volatility, gold will never again go below $1600--it's a new kind of petrodollar for some, too many global players actively vying for it, and too much activist currency debasement for it to go anything but up.

20:1 at today's gold price would put silver at $85/oz. - a difference split between that and the project high wouldn't surprise me at all, $60-$65, with $48-$52 the new floor. Very soon.

[oyarde]

Sounds reasonable to me .

[Jordan]

Can anyone please explain how they arrive at various silver:gold ratios? They aren't really substitutes in industry, they have different demand profiles, and they don't come out of the ground with economics that suggest XX:X ratio.

[Steven Douglas]

Can anyone please explain how they arrive at various silver:gold ratios? They aren't really substitutes in industry, they have different demand profiles, and they don't come out of the ground with economics that suggest XX:X ratio.

There is no one metric for deriving an accurate ratio of anything other than price. How that equates to things like ratios of abundance still in the Earth (not as simple to arrive at as many believe), existing physical above-ground stock of each metal, how each metal is used or consumed, or even how often each are bought and sold on the market, are separate chapters in another story.

What the economics suggest is a distortion, since the quantity of derivatives for each is never equal to the presumed underlying physical, and the variance between the derivatives and the physical is different for each metal. Likewise the trading velocity of each type of derivative, as well as the trading velocity of physical-only. Thus, the real scarcity of each (physical only) is completely distorted by the derivatives to which their prices are coupled.

What most people are trying to guess (and that's all it is, or can be at this point), is what the ratio of gold to silver might be in the event of a full decoupling from derivatives. That could come about from a domino effect of MF Globals (where glass walls are demolished and allocated physical holdings are even STOLEN, with titles made a part of the counter-party claims insanity. If that happens, and a global rats nest of inflated counter-party claims implodes, the majority who THOUGHT they were owners of physical could find themselves without any chair of their own when the music stops. At that point, paper derivatives and other counter-party claims would no longer be trusted. Panic hits, paper gets dumped, more people demand physical with delivery only, until the physical finally decouples completely from the paper, which is driven out of the market.

It's only at that point that another ratio emerges -- one that is far less distorted, and closer to [physical] reality. That's the ratio--the underlying PHYSICAL fundamental--that everyone is guessing at.

[Bern]

Can anyone please explain how they arrive at various silver:gold ratios? ...

It's a simple matter of weight ratios. /jk

[KCIndy]

It's a simple matter of weight ratios. /jk

Weight ratios? No, good sir, 'tis a question of.... velocity!!



And it depends upon whether we're talking about European silver or African silver, of course!

[DFF]

Silver should already be +$50 an ounce. The only, only reason it isn't, is because of criminal manipulation of futures by JPM and their criminal co-conspirators. The catalyst that forces theses assholes to cover their positions, that will be what drives silver prices higher....lot of possibilities...

[stu2002]