Silver Prices – How High Could They Go?

LONDON (Sept 9)   One of the most often asked questions by those interested in investing in silver pertains to not only how low, but how high silver’s price can go.

The range is anywhere from a paper price of zero, given the role of the bullion banks in the decades long silver market price suppression conspiracy, to infinity in the event of a U.S. Dollar hyperinflationary scenario.

Fair warning should be given that any discussion of price assumes that it is expressed in terms of a fiat currency or forced legal tender.

Of course, the ultimate measure of silver’s value is instead its purchasing power, although this value is much murkier and more difficult to compute given that investors are currently living in an age of faith based fiat currency.

Bullish Scenarios for Silver Prices

A number of bullish scenarios exist that could substantially increase the price of silver if they were to materialize. They include the following:

When Physical Shortages Spike Premiums – Retail scarcity of silver could ignite physical premiums, thereby completely detaching the physical price from whatever paper price is being printed by the CFTC ‘regulated’ markets.

If Price is Determined Outside of the United States – Physical demand would prevail once again and would very likely cause the price of silver to overshoot its inflation adjusted highs.

Without a Concentrated Short – A silver market that trades freely based on the amount of available investment grade silver would likely overshoot anything currently considered reasonable in terms of price.

The Historic Gold Silver Price Ratio – This measure has typically traded between 10 and 20 ounces of silver to 1 ounce of gold, rather than the currently observed value in excess of 60 to 1. This historical price ratio range roughly parallels the mining ratio of 9 to 1.

Gold to Silver Investment Ratio Inverted – Using the above ground investment grade 1000 ounce bar form, the gold to silver ratio reverses, thereby potentially making silver more valuable than gold since silver is rarer in its investment form.

Technical Analysis

Fairly conservative technicians currently seem to expect $100 to trade after a $50 breach, although a correction to test the base at $50 could then materialize.

Revised CPI Measures – When the price of silver is inflation adjusted from its historic highs using the old CPI measure, people like John Williams have been quoted saying it should be as high as $500 per ounce.

Using Money Supply – Given the rapid expansion of the money supply since the gold standard was most recently abandoned in 1971, which has accelerated even further after the 2008 financial crisis, analysts like James Rickards have pointed out that a price of $7,000 to $10,000 for an ounce of gold would make more sense. Using the historically reasonable 20 to 1 price ratio, this analysis would put the price of silver in the $350 to $500 per ounce range.