$200 Silver Predictions

"Prediction is difficult, especially if it's about the future." - Niels Bohr

Predicting the future is hard. Take this example from 2005, Gold to $200, Silver $3.50. It starts out "promising" enough...

I'm not going to mention any names here but you gold and silver bugs (and columnists) just crack me up.

And it goes downhill from there urging readers, "...sell your metals."

Contrast the wildly wrong $200 gold prediction with the "to the moon" $200 silver calls. Will we someday look back on calls for $200 silver and mock them, or will they be right? Time will tell. Assembled below are a few of the many calls for silver to reach $200.

Robert Kiyosaki: $200 Silver is Not out of Line:

Rob McEwen, Founder of GoldCorp (Photo credit: Case_Foundation)

Rob McEwen, CEO McEwen Mining (2011): $5,000 Gold & $200 Silver Predicted.

Your readers need to appreciate: Gold is money. It is currency. I think the number of people familiar with gold will grow as people see gold as a currency. China, India, Russia are buying gold to diversify their foreign reserves. To restore the confidence in currencies, I think some central banks, such as the Chinese and possibly the Russian, will increase their gold holdings to the level that the percentage of their total currency will be greater than that of any other currency in the world. At that point, they will assert that their currency should become the reserve currency of the world.

If you look at the last gold run, gold went from $200/oz. in mid-1979 to $800/oz. in early 1980. During the 10-year period of 1970-1980, we saw a 20-fold increase in the price, from $40/oz. to over $800/oz. We also had a 20-year low in 2001 of $250/oz. If you apply that 20-times multiple, you're up to $5,000/oz.

For silver, if you use the historic ratio of an exchange ratio with gold of 16:1, you get to $312, so $200 is conservative. I think we'll see these numbers within four years' time.

Stephen Leeb (2011): Silver to Hit $200 Within 24 Months.

Jurg Kiener, CEO of Swiss Asia Capital (2011):

Eric Sprott (2013): Expect $200 Silver As Financial System Implodes.

Greg McCoach (2011): $200 Silver as COMEX Faces Default.

Close your browser... shut down your computer... and go buy silver!

The price of silver pulled back 8% yesterday afternoon, carving out a phenomenal investment opportunity for you right now.

At last look, spot silver stands at $39.21 an ounce. But the window to own silver below $40/oz will be open only for a short time, because silver prices are headed for an explosive breakout.

Silver will rebound to $60 an ounce following this correction on surging demand — and then quite possibly to $150-$200 an ounce amid growing concerns that the COMEX itself could default over critically low physical warehouse inventories.

Deviant Investor (2013): Expect $200 Silver As The Shift To Real Assets Accelerates.

Throughout history the prices of gold and silver have increased and decreased together, usually with gold costing 10 to 20 times as much as silver. A historical ratio of 15 or 16 is often quoted and that places the current ratio, which is in excess of 50, as relatively high. Since Nixon “closed the gold window” on August 15, 1971 and allowed the dollar to become an unbacked paper currency that could be created in nearly unlimited quantities, the gold to silver ratio has ranged from a high of approximately 100 to a low of approximately 17. There is room for silver prices to explode higher, narrowing the ratio to perhaps 20 to 1. When gold reaches $3,500 (Jim Sinclair) and subsequently much higher in the next few years, and assuming the ratio drops to approximately 20 to 1, the price of silver could approach $200 per ounce, on its way to a much higher number, depending on the extent of the QE-Infinity “money printing,” panic, hyperinflation, and investor demand.

Ted Butler (2004): $200 an Ounce Silver? – Can it Happen?

The end of the manipulation may kick off a whole host of related reactions. You can't keep the price of anything artificially depressed or elevated for decades and not expect violent counter moves when the artificial restraint or prop is suddenly removed. History bears this out. So it is logical to assume that when the silver suppression ends, we will get a severe jolt to the upside. As I have long maintained, it is the manipulation itself that creates the exceptionally low risk and high profit potential. When the manipulation ends, we must move to a price point where supply and demand balance without government inventory dumping. Considering how long silver has been kept depressed, it will take an extremely high price to balance supply and demand.

But this is old news for regular readers, and not the point of this article. Under normal conditions, I do not think it would take $200+ silver to balance the deficit. It would take a much lower price. However, it’s unlikely that normalcy will prevail in the future. There are certain factors that could come into play that could vault silver, in the years ahead, to truly shocking price levels. Just as we have remained grossly undervalued in silver for decades, it is very possible that, in the inevitable move to a market equilibrium price, we could overshoot dramatically to the upside, even if only briefly. There are several factors in place, all unique to silver, that could account for unthinkably high prices.

At the heart of the unique set of silver factors is one common denominator - human emotion and group behavior. People are motivated by price. Ironically, it is only high and rising prices that causes great numbers of people to buy in unison. Low prices discourage mass buying. (That's why silver is not on the mainstream radar screen yet.) If you study the history of investment extremes, or bubbles, it is the rising price itself that is at the heart of the cause for the move. The big problem is that the masses, excited by the price rise, come in late and stay too long.

Terry Kinder (yes me, from 2011 - Article originally appeared in the Daily Libertarian with the title, "Silver is Screaming".

Sadly, but not surprisingly, the declining dollar is the result of a deliberate government policy of devaluation. In "The Global Recession Risk: Dollar Devaluation and the World Economy" by Pelaez and Pelaez, they discuss how a 40 percent devaluation of the dollar might be necessary in order to bring the current account deficit (CAD) of the U.S. back into balance. Interestingly, a FEDPOINT from the Federal Reserve Bank of New York outlines why a country might devalue its currency and what effects that might have. The effects of devaluation reads a bit like those warnings on prescription drugs:

"A significant danger is that by increasing the price of imports and stimulating greater demand for domestic products, devaluation can aggravate inflation. If this happens, the government may have to raise interest rates to control inflation, but at the cost of slower economic growth.

Another risk of devaluation is psychological. To the extent that devaluation is viewed as a sign of economic weakness, the creditworthiness of the nation may be jeopardized. Thus, devaluation may dampen investor confidence" in the country's economy and hurt the country's ability to secure foreign investment."

Let's see - inflation, higher interest rates, jeopardized creditworthiness and inability to secure foreign investment. Sign me up Dr. Kevorkian!

There's much more to the $200 silver story. Niels Bohr was right, prediction is difficult. I have some predictions of my own from the past - some already wrong and others with deadlines approaching, but we'll leave that for another post.