Commodity Trade Mantra

Silver is 8 times Cheaper than should be – Buy before the Discount Disappears

Silver is 8 times Cheaper than should be - Buy before the Discount Disappears

Silver Prices are 8 times Lower than should be

Keith Neumeyer just made a bold prediction.

Yesterday, he said a key precious metal indicator was going “to collapse.” When it does, early investors will make a killing.

Today’s essay is all about that opportunity. I’ll even tell you the best way to profit from this.

But you should first understand why I’m writing about this.

Right now, I’m at the Sprott Natural Resource Symposium in Vancouver. I’m here to learn from some of the world’s smartest investors…and Neumeyer is at the head of that class.

You see, Neumeyer is a true legend in the natural resource business.

He’s on the board of several major mining companies. And he’s funded two billion-dollar companies of his own. One of them is First Quantum Minerals, a leading copper producer. The other, First Majestic Silver, is one of the world’s largest copper miners.

In other words, he knows as much about the natural resource market as anyone on the planet.

And right now, he thinks silver is a screaming buy. That’s because the gold-silver ratio is far too high.

• The gold-silver ratio is one of the world’s most closely watched indicators…

It measures how many ounces of silver it takes to buy one ounce of gold.

A high ratio means that it takes many ounces of silver to buy an ounce of gold. It means silver’s cheap.

You can see that the gold-silver ratio is at about 75 right now. That’s 50% higher than its average going back to 1950.

In other words, it’s trading at a huge discount to gold.

• But Neumeyer doesn’t think silver will be on sale much longer…

To understand why, look at the chart below he shared yesterday.

It’s almost identical to the chart you just saw. But this one highlights the critical level of 80.

I say “critical” because the gold-silver ratio has only hit this level four times in the last three decades.

Every time it has, silver went on to have a big rally.

After hitting this level in 1990, it went on to surge 47%.

Thirteen years later, the ratio hit 80 again. This time, silver soared 224% over the following three years.

It happened for a third time in 2008. Silver went on to soar 371% over the following three years.

The ratio hit 80 for the fourth and most recent time back in February 2016.

Since then, silver’s risen 9%.

That’s a decent move…but Neumeyer thinks silver’s headed even higher.

That’s because the gold-silver ratio is still far too high. In his eyes, it should be closer to 9:1.

That’s a bold call, to say the least. It means silver is eight times cheaper than it should be.

But Neumeyer didn’t just pick this number out of thin air…

• It’s based on a law of nature…

You see, there are about 17 ounces of silver in the Earth’s crust for every ounce of gold. But only about half of that silver (or about 8.5 ounces) is recoverable.

We know this because modern mining companies dig up about nine ounces of silver for every ounce of gold they mine.

Neumeyer says gold and silver prices should reflect this natural ratio.

There are only two ways this happens: 1) The price of gold could decline relative to silver’s price, or 2) the price of silver could rise relative to gold.

• Neumeyer thinks the second scenario is more likely…

Here’s why…

The silver market is in a deficit. This means people are consuming more silver than is being produced. Not only that, last year was the fourth straight year that demand outstripped supply.

You don’t have to be an economist to know that this is good for the price of silver.

Silver production is falling. Last year was the first time in more than a decade mine production fell.

That’s a big deal.

But Neumeyer thinks silver mine production will fall again this year. In other words, the supply of silver is going to get even tighter. But that’s not the only thing that should take silver prices higher.

Industrial demand for silver is growing. And solar power is a big reason for this.

You see, silver is a key ingredient in most solar panels. In fact, the average solar roof in the U.S. uses around 2,000 grams of silver.

That’s a lot of silver. It’s why many smart people think silver demand will soar…because of solar energy.

In fact, our in-house commodity expert Louis James estimates that the solar industry would require 1.3 billion ounces of silver if just 20% of U.S. households put solar panels on their roofs.

That’s 30% more silver than the entire industry supplied last year. And that’s just one industrial use.

In short, the stage is set for much higher silver prices. This is why Neumeyer told a room full of savvy investors and natural resource executives to buy silver yesterday.

I encourage you to take his advice if you haven’t already.

• You might also want to consider speculating on silver prices…

The best way to do this is by buying silver miners.

These companies are leveraged to the price of silver. In other words, a small rise in silver can cause their shares to soar.

Unfortunately, most people don’t know the first thing about buying quality silver stocks. – Justin Spittler

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request your views on the above article

  • You had me going until I saw solar as the big driver in silver consumption. Silver is being replaced with aluminum, just like digital photography replaced silver in film.

  • everything

    If silver production is falling that’s got to tell you something, the cycle of investment is ebbing or it’s unprofitable to mine, we just peaked out for silver production with a few years back to back where 30% of silver mined was purchased for investment purposes only. I see copper prices are up a notch so being a byproduct of copper mining we should see silver production holding, but yeah otherwise, I pretty much know nothing. So .. now that the big money has spoken expect silver to hit at least $20, maybe even $21 again this year with little to no real explanation behind it!

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