The drugs of choice for governments—money printing, deficit spending and nonstop debt increasing—have proved to be too addictive for world leaders to break their habits.
At this point, the US and other governments around the world have toked, snorted, and mainlined their way into an addictive corner; they are completely hooked.
The Fed and their international central-bank peers are the drug pushers, providing the easy money to keep the high going. And despite the Fed’s latest taper of bond purchases, past actions will not be consequence-free.
At first,drug-induced highs feel euphoric, but eventually the body breaks down from the abuse. Similarly, artificial stimuli and sub-rosa manipulations by central banks have delivered their special effects—but addiction always leads to a system breakdown.
When government financial bailout addicts are finally forced into cold-turkey withdrawal, the ensuing crisis will spark a rush into precious metals.
The situation will be exacerbated when assets perceived as “safe” today—like bonds and the almighty greenback—enter bear markets or crash entirely.
As a result, the rise in silver prices from current levels won’t be 10% or 20%—but a double, triple, or more.
If inflation picks up steam, $100 silver is not a fantasy but a distinct possibility.
Gold will benefit, too, of course, but due to silver’s higher volatility, we expect it will hand us a higher percentage return, just as it has many times in the past.
Eventually, all markets correct excesses. The global economy is near a tipping point, and we must prepare our portfolios now, ahead of that chaos, which includes owning a meaningful amount of physical silver along with our gold. It’s time to build for a big payday.
Why I’m Excited about Silver? Many Reasons!
When considering the catalysts for silver, let’s first ignore short-term factors such as net short/long positions, fluctuations in weekly ETF holdings, or the latest open interest. Data like these fluctuate regularly and rarely have long-term bearing on the price of silver.
I’m more interested in the big-picture forces that could impact silver over the next several years.
The most significant force, of course, is what I stated above: governments’ abuse of “financial heroin” that will inevitably lead to a currency crisis in many countries around the world, pushing silver and gold to record levels.
At no time in history have governments printed this much money. And not one currency in the world is anchored to gold or any other tangible standard.
This unprecedented setup means that whatever fallout results, it will be of historic proportions and affect each of us personally.
Specific to silver itself, here are the data that tell me “something big this way comes.”
The Inflation-Adjusted Silver Price Has a Long Way to Go
One hint of silver’s potential is its inflation-adjusted price. I asked John Williams of Shadow Stats to calculate the silver price in June 2014 dollars (July data is not yet available).
Shown below is the silver price adjusted for both the CPI-U, as calculated by the Bureau of Labor Statistics, and the price adjusted using ShadowStats data based on the CPI-U formula from 1980 (the formula has since been adjusted multiple times to keep the inflation number as low as possible).
The $48 peak in April 2011 was less than half the inflation-adjusted price of January 1980, based on the current CPI-U calculation.
If we use the 1980 formula to measure inflation, silver would need to top $470 to beat that peak.
I’m not counting on silver going that high (at least I hope not, because I think there will be literal blood in the streets if it does), but clearly, the odds are skewed to the upside—and there’s a lot of room to run.
Silver Price vs. Production Costs
Producers have been forced to reduce costs in light of last year’s crash in the silver price. Some have done a better job at this than others, but check out how margins have narrowed.
Relative to the cost of production, the silver price is at its lowest level since 2005.
Keep in mind that cash costs are only a portion of all-in expenses, and the silver price has historically traded well above this figure (all-in costs are just now being widely reported).
That margins have tightened so dramatically is not sustainable on a long-term basis without affecting the industry.
It also makes it likely that prices have bottomed, since producers can only cut expenses so much.
Although roughly 75% of silver is produced as a by-product, prices are determined at the margin; if a mine can’t operate profitably or a new project won’t earn a profit at low prices, the resulting drop in output would serve as a catalyst for higher prices.
Furthermore, much of the current cost-cutting has come from reduced exploration budgets, which will curtail future supply.
Low Inventories
Various entities hold inventories of silver bullion, and these levels were high when US coinage contained silver.
As all US coins intended for circulation have been minted from base metals for decades, the need for high inventories is thus lower today. But this chart shows how little is available.
You can see how low current inventories are on a historical basis, most of which are held in exchange-traded products.
This is important because these investors have been net buyers since 2005 and thus have kept that metal off the market.
The remaining amount of inventory is 241 million ounces, only 25% of one year’s supply—whereas in 1990 it represented roughly eight times supply.
If demand were to suddenly surge, those needs could not be met by existing inventories.
In fact, ETP investors would likely take more metal off the market. (The “implied unreported stocks” refers to private and other unreported depositories around the world, another strikingly smaller number.)
If investment demand were to repeat the surge it saw from 2005 to 2009, this would leave little room for error on the supply side.
Conclusion of the Bear Market
This updated snapshot of six decades of bear markets signals that ours is near exhaustion. The black line represents silver’s decline from April 2011 through August 8, 2014.
The historical record suggests that buying silver now is a low-risk investment.
Cheap Compared to Other Commodities
Take a look at how the silver price compares to other precious metals and the most common base metals.
Percent Change From… | ||||
1 Year Ago | 5 Years Ago | 10 Years Ago | All-Time High | |
Gold | -2% | 38% | 234% | -31% |
Silver | -6% | 35% | 239% | -60% |
Platinum | 3% | 20% | 83% | -35% |
Palladium | 14% | 252% | 238% | -21% |
Copper | -4% | 37% | 146% | -32% |
Nickel | 32% | 26% | 17% | -64% |
Zinc | 26% | 49% | 128% | -47% |
Only nickel is further away from its all-time high than silver.
Low Mainstream Participation
Another indicator of silver’s potential is how much it represents of global financial wealth, compared to its percentage when silver hit $50 in 1980.
In spite of ongoing strong demand for physical metal, silver currently represents only 0.01% of the world’s financial wealth. This is one-twenty-fifth its 1980 level. Even that big price spike we saw in 2011 pales in comparison.
There’s an enormous amount of room for silver to become a greater part of mainstream investment portfolios.
Watch Out for China!
It’s not just gold that is moving from West to East.
Don’t look now, but the SHFE (Shanghai Futures Exchange) has overtaken the Comex and become the world’s largest futures silver exchange. In fact, the SHFE accounted for 48.6% of all volume last year.
The Comex, meanwhile, is in sharp decline, falling from 93.4% market share as recently as 2001 to less than half that amount today.
And all that trading has led to a sharp decrease in silver inventories at the exchange.
While most silver (and gold) contracts are settled in cash at the COMEX, the majority of contracts on the Shanghai exchanges are settled in physical metal which has led to a huge drain of silver stocks.
Since January 2013, silver inventories at the Shanghai Futures Exchange have fallen a remarkable 84% to a record low 148 tonnes. If this trend continues, the Chinese exchanges will experience a serious supply crunch in the not-too-distant future.
There’s more…
- Domestic silver supply in China is expected to hit an all-time high and exceed 250 million ounces this year (between mine production, imports, and scrap). By comparison, it was less than 70 million ounces in 2000. However, virtually none of this is exported and is thus unavailable to the world market.
- Chinese investors are estimated to have purchased 22 million ounces of silver in 2013, the second-largest amount behind India. It was zero in 1999.
- The biggest percentage growth in silver applications comes from China. Photography, jewelry, silverware, electronics, batteries, solar panels, brazing alloys, and biocides uses are all growing at a faster clip in China than any other country in the world.
The Bottom Line
These are my top reasons for buying silver now. Based on this review of big-picture data, what conclusion would you draw?
If you’re like me, you’re forced to acknowledge that the next few years could be a very exciting time for silver investors.
Just like gold, our stash of silver will help us maintain our standard of living—but may be even more practical to use for small purchases.
And in a high-inflation/decaying-dollar scenario, the silver price is likely to exceed consumer price inflation, giving us further purchasing power protection.
The bottom line is that the current silver price should be seen as a long-term buying opportunity. This may or may not be our last chance to buy at these levels for this cycle, but if you like bargains, silver’s neon “Sale!” sign are flashing like a disco ball.
If you are ready to invest in IRA-approved silver bullion, view our List of Top 10 Gold/Silver IRA Companies and rollover your retirement plan or invest your resources directly into purchasing one now!
Do you have any questions on how high silver prices can possibly go in 2019 and beyond? Ask below!
100% rise in Silver prices? That is really too good to be true. Even as you have explained the reason why the entire purchase amount is returned I think I might still have to perform a little research to know more. I have known Silver to be of good income butbI dont know it has much benefits like this.
I do like the program like this and it seems its high time I invest with Bestira option. Thanks for sharing
Hello Ola! If you want to invest with us, particularly in a Silver IRA, we recommend that you view our List of Top 10 Gold/Silver IRA Companies and choose to work with the best company, Regal Assets. You can read our reviews to see why they are better than everyone else. Thank you for coming by again!
Your articles are always a motivational factor for investing for the future. Your reviews made it known to us how high silver price can go in 2019.i will be doing more research to have a strong believe about investing heavily in silver. I would stay on this page to learn more on IRA approved silver bullion.
Thank you for the review and the insight. Best regards
Thank you for dropping by and sharing what you have learned Adamu! Best regards to you as well always.
I appreciate this informative piece. All the reasons you mentioned are quite valid why every investor should consider having silver in his/her portfolio for the future. Silver, just like Gold would always be in limited supply, and considering the low inventory of silver and the present current price which does not reflect its true value, upsurge in demand which would always happen would definitely make people who have invested in it smile to the banks.
Hello Tolu and thank you for sharing what you have learned in the article! I am glad my article was informative to you.
What can I say than to say that your article made my day. The world is moving at a faster pace. The only time one can invest in Silver is now. If by going with the statistics you gave on the rise of silver then I think every investor that want to have a brighter future for himself and children should never miss the opportunity of investing in Silver now. I am really intrigued by this article and am posed to inquire more. I am really interested. You have never lost the focus of making people see the importance of investing into their future. Kudos to you!
Thank you for letting me know what you have learned from the article! I am glad it was helpful to you. Kudos to you as well, Olalekan!
This is another informative article from your blog.! You have always shown us reasons to invest especially in Gold.
Thanks for the explicit review on silver prices and how high it can go in this present year 2019. Silver is really turning to be as lucrative as that of Gold, I have seen all reasons to start investing on silver. I anticipate your response on guides to follow.
Yes, Tunde, both silver and gold are lucrative options at the moment and they most likely will be in the future. Thank you for coming by again and sharing what you have learned! I am glad the article was helpful to you.
You are very knowledgeable, and I absolutely love your website. I agree with you that things just can’t keep going as they have been with the money printing, not back it, etc., and just expect everything to be fine. I feel like the United States Citizens feel like we just can’t ever fail. We’re the United States, after all, right? We’ve got it all, we’ve had it all, and we will prosper, until we don’t. I do believe that precious metals are an investment for the future.
Hello Babsie, and thank you for your comment and insight! Yes, although we are citizens of this country, we have to conduct our own research for our future prosperity and retirement purposes. Investing in precious metals such as silver will always be a safe-haven for investors looking to escape the volatility of the currency markets.
Thanks for writing this article on how high silver price can go this year. I have been reading most of your article on gold a store of value for somethings now and I commend you for the work you put into this articles.from all indications of what happening around the world with all the predications of financial crisis in coming months,there is high probability that people will start looking for how to keep the values of there intact in other for this financial crisis not to have negative effects on value of there wealth.both gold and silver will experience increase in price when all this financial crisis occur
Thank you for your comment, Ajibola! I’m glad to see you learned much from my article!
Thanks for this informative post,All of these make this precious metal a good investment asset for many. However, the price of silver has been range-bound for quite some time, while gold on the other hand has done fairly well on medium to long-term basis. It can be rightly said that for long-term investor, it is a good time to invest in silver. Great job.
Hello Seun and thank you for your comment and insight! Thank you also for the compliment!
It would be a great time for silver investors if what you are predicting actually comes to pass. For the value of silver to double is something I would really like to see. You seem to base part of your fact on the drug business actually running out before this increase can be expected.
To be honest I don’t see this happening because these drug traffickers would always have a way to distribute their products which means bulk of the money would still remain in the drug trafficking business.
Hello Jay! Actually, I am making a comparison that the government is high off of currency-inflation and debt. It was a metaphor. Because the government is getting so high off of inflation and debt, the body, which is the people of the nations, are suffering. I hope that clears up the comparison for you a little bit more!
I agree with the fact that the next few years could be a very exciting time for silver investor too. I also believe it’s time for us to diversify as a nation or people. Just like gold, our stash of silver will help us maintain our standard of living, but may be even more practical to use for small purchases. I would also like to State that there is every possibility that the price of silver would go high in 2019.
Hello Seyi! Stashing your silver is one option, but it is quite dangerous and risky. This is why we suggest a gold or silver IRA. Thank you for the insight!
Great post and good info.
You know, a couple of days ago I heard a economic professor saying that soon the stock market will crash again, and very bad, which means that if you invest in silver now, you can get rich.
It is simple: if the stock markets plummets, people look for alternatives. In this case gold or silver, and I think that the cost of it will be even more than triple in this case.
What do you think about that?
Hello Emmanuel! I myself am an economics major and I completely agree with the professor. Precious metals are the first alternatives a savvy investor looks for when the stock market crashes. It is best to do so from the first place as a safe haven from such catastrophes, in my humble opinion. Thank you for the question!