A Golden Opportunity for Silver

December 23, 2020 Stan

My father is my hero. His mother died when he was 3… his father when he was 20. He was born in 1933 in a tiny village in India. At that time, India was incredibly poor, with people dying of hunger every day. Somehow, he put himself through college. And then Dad got a job in Bombay, India’s biggest city. Still, he was broke with a family to support.

In 1974, he applied for a job in Dubai. Nobody had heard of Dubai.

“Don’t go!” his siblings told him when he got the job.

India’s prospects were horrible. Dubai had just found oil. He knew taking a chance on Dubai was a better bet. It was a calculated risk.

“I have nothing to lose,” he told his family when he took the job.

Dubai was mostly desert when he arrived. He’d go to the sheikh’s palace to have coffee and discuss business.

In hindsight, going to Dubai was a no-brainer. Dubai grew spectacularly. Dad made 100,000 times more money than if he had stayed in India. By the time he died in 2000, he’d put my sister and me through college. And he’d saved enough so my mom has never had to work or worry about money.

Bottom line: My dad took a calculated risk when he took a chance on Dubai, and it paid off in spades.

I’m my father’s son. Calculated risk-taking is my philosophy to investing and trading. It’s how I made money for clients while on Wall Street. And it’s how I invest my own money now.

A calculated risk in financial markets means you take opportunities when the odds are in your favor. That way when you invest, you have a good chance of making money. You never get a guarantee, of course, but when I get good odds, I make the bet.

Today, I’m going to show you an incredible opportunity in the precious-metals market. It’s a trade where the odds are in your favor as I’ll show you. And it’s a trade that I’ve put my own money into.

If you buy 1 ounce of gold today, it’ll cost you 80 ounces of silver. In other words, gold is 80 times more valuable than silver. That’s happened only three times in the last 15 years. It’s extreme. And usually when the gold-to-silver ratio hits extreme levels, two things happen.

First, you see prices go up. Period. In 2008, when the ratio hit 80, silver soared. In 2002, silver rallied nearly 100%. In 1991, the metal gained over 40%.

Second, silver’s price climbs faster than gold prices.

Silver Is Too Low

What’s going on? Why does this keep happening?

Gold is a precious metal with mostly investment demand. Investment demand means people own it because they believe gold’s price is going to go up.

Silver has two sources of demand: investment demand because it’s a precious metal, and industrial demand. For example, it is used in solar energy, to make electronic circuits and as a catalyst in chemical reactions.

Approximately 56% of silver’s use goes to industrial demand. As a result, prices are sensitive to industrial demand. That’s why gold and silver don’t trade tightly with each other.

Another reason is that silver is rarely found on its own. As much as 66% of silver comes as a by-product of mining copper, lead and zinc. Silver supply goes up when companies are increasing mining of these metals. So, you have a situation where there is too much silver supply compared to demand. Because of that, silver prices go low, even when gold prices are rising.

Supply Won’t Keep Up

So, what’s going on now? Copper is near a six-year low. Zinc at a nine-year low. Lead at a five-year low. Because of these collapsing prices, mining companies have slashed production of these metals. Not surprisingly, silver production is set to plummet as well. Capital Economics, a well-respected research company, estimates that production is going to drop 9.2% in 2016 and 13% in 2017.

However, demand for silver is strong. Investment demand is up 400% from under 50 million ounces in 2006 to 200 million ounces in 2015. Investment demand is going to keep soaring because of negative interest rates and financial instability causing mistrust in paper currencies.

What’s more, industrial demand for silver is expected to rise 3% in 2016.

Shrinking supply. Rising demand. The gold-silver ratio is above 80 – a level where silver soars from past history. One, two, three. The stars are aligned for the metal to soar. How high? The price of silver could go to $30 per ounce at least, which is about 100% from its current price.

Good Odds for Big Gains

This is the kind of trade you should love to put on. The odds are in your favor. Of course, there are no sure things in investing, but I believe silver is a rock-solid bet to go up from its current price.

You can play silver by buying physical bars or coins.

Finally, you can buy silver-focused mining companies trading in the stock market, which is how I’ve made my bet. Unfortunately, there are no ETFs that focus on silver-mining companies to recommend to you. And it would be imprudent to tell you to buy a stock without giving you all the facts and proper analysis.