Silver Update: Silver nears $50

In December I pointed out Silver was the Best Investment of 2011. At the time Silver was around $28. In January it dropped a bit... into the $26s and then began to launch. So, if you bought in the $26-28 range is it time to run? Is Silver a bubble about to pop?

Check out these charts... the Dow vs. Silver



If you look at the chart to the right. Silver hit a 27 year support in 2007... and yet the biggest gains have been since.

And if you look at this chart you'll see after 2007 the ratio continued to drop.










These charts would suggest it might be time to start diversifying. And if you do believe in these charts I'd say you may want to take some off the table and stick it into something else that has tangible value (non-dollar denominated). But I'm not convinced because I believe in another chart much more.

The chart on the right shows the value of gold vs. the Dow since 1900.









The chart on the right shows the value of Silver vs. Gold since 1792. In 1873 the US government began supporting gold and downplaying Silver. In 1900 the US went on a gold standard. In 1933 the US confiscated gold. In 1971 the US divorced the gold standard.






Reading these charts we can see the Gold vs. Dow is likely headed for the 1-5 Gold to the Dow. And the Gold to Silver ratio is headed to the 15 to 1 range. Gold is currently $1564. The Dow is 12,820. Silver is $46. The Dow/Gold Ratio is 8.2 today and the Gold/Silver Ratio is 34. So where are we going?

Well... there is one more variable I'm concerned with. And that is the value of the dollar or more honestly, the Federal Reserve Note. It is what is keeping much of what we see floating. And I would suggest the Dow has been much more susceptible to the Fed's pumping currency than commodities.In addition, we have much of the various government's pension funds wrapped up in the Stock Market. A fall in the Dow could bankrupt the vast majority of these.

So it's pretty clear the Fed will continue to print the FRN into non-existence and the Dow will be the last bubble popped. But the key will probably be a price of Gold to the Dow at less than 5 and Gold to Silver at less than 20. In today's value that would be Gold at $2564 and Silver at $128. With the FRN sinking this could be a great deal more... And if we hit one to one  Gold would be $12,820 and Gold to Silver at 10 Silver would be $1,282. I'll be following the ratios and ignoring the price in FRNs.

One last comment... Gold and Silver isn't necessarily an investment. It's more a traditional mark of value. But when you don't have a roof over your head, food and water to sustain you, your sick or defenseless. It's not the thing to have because it will only make you a target. We are certainly headed for some tough times ahead but it's those that keep their head up, band together and trudge ahead despite the difficulties that really set the stage for freedom and prosperity in the future.