A golden opportunity for silver
My father is my hero. His mother died when he was 3 years old… his father when he was 20. He was born in 1933 in a small town in India. At the time, India was incredibly poor, with people starving every day. Somehow, he put himself through college. And then dad got a job in Bombay, the largest city in India. Still, he was broke with a family to support.
In 1974, he applied for a job in Dubai. No one had heard of Dubai.
“Do not go!” his brothers told him when he got the job.
India’s prospects were dire. Dubai had just struck oil. She knew that 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 accepted the job.
Dubai was practically deserted when he arrived. He would go to the sheikh’s palace to drink coffee and talk 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 had put my sister and me through college. And he had saved enough that my mom never had to work or worry about money.
Bottom line: My dad took a calculated risk when he gambled in Dubai, and it paid off.
I am my father’s son. Calculated risk taking is my philosophy for investing and trading. This is how I made money for clients while on Wall Street. And this is how I invest my own money now.
Calculated risk in financial markets means that you take advantage of opportunities when the odds are in your favor. That way, when you invest, you have a good chance of making money. Of course, you never get a guarantee, but when I have good odds, I make the bet.
Today I am 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 business I’ve put my own money into.
If you buy 1 ounce of gold today, it will cost you 80 ounces of silver. In other words, gold is 80 times more valuable than silver. That only happened three times in the last 15 years. it’s extreme. And typically when the gold-silver ratio reaches extreme levels, two things happen.
First, you see prices go up. Period. In 2008, when the ratio hit 80, silver skyrocketed. In 2002, silver rose almost 100%. In 1991, the metal gained more than 40%.
Second, the price of silver rises faster than the price of gold.
silver is too low
What’s going on? Why does this keep happening?
Gold is a precious metal with the greatest investment demand. Investment demand means that people own it because they think the price of gold is going to go up.
Silver has two sources of demand: investment demand because it is 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 use is for industrial demand. As a result, prices are sensitive to industrial demand. That is why gold and silver do not trade closely with each other.
Another reason is that silver is rarely found alone. Up to 66% of silver is a by-product of mining copper, lead and zinc. The supply of silver increases when companies increase the extraction of these metals. So you have a situation where there is too much supply of silver compared to the demand. This is why silver prices go down, even when gold prices are going up.
supply is not maintained
So what is happening now? Copper is near a six-year low. Zinc in a minimum of nine years. Lead in five year minimums. Due to this price collapse, mining companies have drastically reduced the production of these metals. Not surprisingly, silver production also plummeted. Capital Economics, a highly respected research firm, estimates that output will fall 9.2% in 2016 and 13% in 2017.
However, the demand for silver is strong. Investment demand increased 400% from less than 50 million ounces in 2006 to 200 million ounces in 2015. Investment demand will continue to rise due to negative interest rates and financial instability leading to distrust of paper currencies .
Furthermore, industrial demand for silver is expected to increase by 3% in 2016.
Decrease in supply. Increased demand. The gold-silver ratio is above 80, a level at which silver has risen since past history. One two Three. The stars align for the metal to rise. How high? The price of silver could go up to $30 per ounce at least, which is around 100% of its current price.
Good odds for big wins
This is the type of trade you would love to do. The odds are in your favor. Of course, there are no sure things in investing, but I think silver is a solid bet to go higher from its current price.
You can play silver by buying physical bars or coins.
Finally, you can buy silver-focused mining companies that are listed on the stock market, which is how I made my bet. Unfortunately, there are no ETFs that focus on silver mining companies to recommend to you. And it would be unwise to tell you to buy a stock without giving you all the facts and proper analysis.