Aproximately
70 respected economists, academics, gold analysts and market
commentators (see list below) are of the firm opinion that gold is going
to go
to at least $2,500 if not as high as $10,000 per ounce (or more) before
the
parabolic top is reached. As such, just imagine what is in store for
silver
given its historical price relationship with gold. We’re looking at an
extreme
case scenario of a future parabolic top of perhaps as much as $714 per
ounce for
silver, the ‘poor man’s gold’. Let me explain.

The
current price
of gold and the price of silver – the silver:gold ratio – continues to
hover
around the 67:1 range which is way out of whack with the historical
relationship
between the two precious metals.  It begs the question:

"Is now the perfect time to buy silver
instead of the much
more expensive gold metal?"

It is critical to
step away from all the noise and clutter that passes for knowledge and take the
time to gain perspective on where the price of gold and silver are in terms of
the ‘big picture’, i.e., where they are in their individual performance channels
and in respect to their historical relationship with each other over the long,
medium and short term and, based on those relationships, how they might perform
in the future.

Bull Market Stages

The key to a
secular gold/silver bull is the collective gold/silver transactions of investors
worldwide buying and selling gold/silver that ultimately sets the price and
determines their fortunes. The collective demand trends of gold/silver investors
effectively divide precious metals bulls into 3 distinct demand-driven stages,
namely:

1. Stage One which occurs when a devaluation of the dominant currency in which
gold is priced, i.e. the USD, leads to a moderate increase in the price of gold.
Stage One for gold began on February 15th, 2001 when it reached a 22-year
secular low of just $255.10.

2. Stage Two which occurs when the decoupling of gold from local-currency
devaluation begins to outpace the dollar’s losses and gold starts rising
significantly in virtually all currencies worldwide. Stage Two began on June
5th, 2005 when gold (at $417.67US) first surpassed 350 Euros for the first
time.

3. Stage Three which occurs when the general public around the world starts
investing in gold and this deluge of capital into gold causes it to escalate
dramatically (i.e. to go parabolic) in price. We are approaching Stage Three and
it will become clearly evident when the price for gold begins its daily record
ascents to dramatically higher prices.

Gold

We are now in the
very early stages of Stage Three with gold having gone up 24% in 2009 and up
13.3% in the first 6 months of 2010. As such there are no shortage of
prognosticators who see gold going parabolic reminiscent of 1979 when gold rose
289.3% in the course of just over a year (from a $216.55 closing price on Jan.
1, 1979 to a closing price of $843 per ounce barely a year later on Jan. 21,
1980) and 128% higher in a late-1979 parabolic blow-off of just under 11 weeks!
A 289% increase in the price of gold from $1250 would put gold at $4,866.   That
being the case what appear on the surface to be rather outlandish projections of
what the bull market in gold will top out at don’t seem quite so far-fetched.
 

Below is a list
of the parabolic tops for gold as discussed in articles and/or speeches by well
known economists, academics, market analysts and financial commentators.  Their
prognoses are limited to those above the CPI adjusted 2010 price of $2,300 and
they are grouped according to the extent each individual sees gold appreciating
over the next few years (and next few months in a few cases).

The list below is
provided on my site – with a link to the actual article in which each estimate
was put forth if you care to check out the rationale behind each individual’s
projections. 

Higher than $10,000

1.  

   1. Jim Sinclair: $17,000; (by
      2012);
   2. Mike
      Maloney: $15,000;
   3. Howard Katz: $14,000;
   4. Silver-Coin-Investor.com: $7,000-$14,000;
   5. Jim
      Rickards: $4,000 – $11,000
   6. Roland Watson: $10,800 (in our lifetime);

$5,001 – $10,000

1.  

   1. Arnold Bock: $10,000 (by
      2012);
   2. Porter Stansberry: $10,000 (by 2012);
   3. Tom
      Fischer: $10,000;
   4. Shayne McGuire: $10,000;
   5. Eric
      Hommelberg: $10,000;
   6. Gerald Celente: $6,000 – $10,000;
   7. Peter
      Schiff: $5,000 – $10,000 (in 5 to 10 years);
   8. Egon
      von Greyerz: $5,000 – $10,000;
   9. Patrick Kerr: $5,000 – $10,000 (by 2011);
   10. Peter
       Millar: $5,000 – $10,000;
   11. Alf
       Field: $4,250 – $10,000;
   12. Jeff
       Nielson: $3,000 – $10,000;
   13. Dennis van Ek: $9,000 (by 2015);
   14. James
       Turk: $8,000 (by 2015);
   15. Joseph Russo: $7,000 – $8,000;
   16. David
       Petch; $6,000 –  $$8,000;
   17. Michael Rozeff: $2,865 – $7,151;
   18. Martin Murenbeeld: $3,100 – $7,000;
   19. Dylan
       Grice: $6,300;
   20. Murray Sabrin: $6,153;
   21. Harry
       Schultz: $6,000;
   22. Paul
       van Edeen: $6,000;
   23. Paul
       Brodsky/Lee Quaintance: $3,000 – $6,000;

$5,000

1.  

   1. David Rosenberg:
      $5,000;
   2. Martin Hutchinson: $5,000 (by end of 2010);
   3. Doug
      Casey: $5,000;
   4. Peter
      Cooper: $5,000;
   5. Robert McEwen: $5,000;
   6. Martin Armstrong: $5,000 (by 2016);
   7. Peter
      Krauth: $5,000;
   8. Tim
      Iacono: $5,000 (by 2017);
   9. Christopher Wyke: $5,000;
   10. Frank
       Barbera: $5,000;
   11. John
       Lee: $5,000;
   12. Peter
       Dawes: $5,000;

$2,500 – $5,000

1.  

   1. Pierre Lassonde:  $4,000 –
      $5,000;
   2. Howard Katz: $3,300 – $5,000;
   3. Mary
      Anne and Pamela Aden: $3,000 – $5,000 (by February 2012);
   4. Larry
      Edelson: $2300 – $5,000 (by 2012);
   5. Luke
      Burgess: $2,000- – $5,000;
   6. Ian
      Gordon/Christopher Funston; $4,000;
   7. D.P.
      Baker: $3,000 – $3750;
   8. Christopher Wood:  $3,500 (in 2010);
   9. Adam
      Hamilton: $3,500 (by 2010/11);
   10. Eric
       Roseman: $2,500 – $3,500 (by 2015);
   11. John
       Henderson: $3,000+ (by 2015-17);
   12. Hans
       Goetti: $3,000;
   13. Michael Yorba: $3,000;
   14. David
       Tice: $3,000 (by 2012);
   15. David
       Urban; $3,000;
   16. Michael Lambert: $3,000;
   17. Brett
       Arends: $3,000;
   18. Ambrose Evans-Pritchard: $3,000;
   19. Trader Mark: $3,000 (by mid-2011);
   20. Ian
       Williams: $3,000;
   21. Byron
       King: $3,000;
   22. John
       McAvity: $2,500 – $3,000 (by 2012);
   23. Graham French: $2,000 – $3,000;
   24. Sascha Opel: $2,500+;
   25. Rick
       Rule: $2,500 (by 2013);
   26. Daniel Brebner: $2,500;

Silver

Silver has proven
itself, time and again, to be a safe haven for investors during times of
economic uncertainty and, as such, with the current economy in difficulty the
silver market has become a flight to quality investment vehicle. The 49%
increase in silver in 2009 attests to that in spades (albeit up only 10% in the
first 6 months of 2010). During the last parabolic phase for silver in 1979/80
silver went from a low of $5.94 on January 2nd, 1979 to a close of $49.45 in
early January, 1980 which represented an increase of 732.5% in just over one
year. Such a percentage increase from the current price for silver would
represent a future parabolic top price of $155.   Frankly, such prices seem
impossible in practical terms but that is what the numbers tell us.

Silver:Gold Ratio

How both gold and
silver perform, in and of themselves, does not tell the complete picture by a
long shot, however. More important is the price relationship – the correlation –
of one to the other over time which is called the silver:gold ratio.

Based on silver’s
historical correlation r-square with gold of approximately 90 – 95% silver’s
daily trading action almost always mirrors, and usually amplifies, underlying
moves in gold. With significant increases in the price of gold expected over the
next few years even greater increases are anticipated in silver’s price movement
in the months and years to come because silver is currently seriously
undervalued relative to gold as the following historical relationships
attests.

Let’s look at the
silver:gold ratio from several different perspectives:

– Over the past 125 years the mean silver:gold ratio (i.e. 50%
above and 50% below) has been 45.69 ounces of silver to 1 ounce of
gold.

– In the last 25 years (since 1985) the mean silver:gold ratio has
increased to 66.9:1

– The present silver:gold ratio is range-bound
between 63:1 and 70:1 (66.77:1 at the end of June 2010).

–
Interestingly, during the build-up to the parabolic blow-off in 1979/80 silver
outpaced gold going up 732.5% vs. gold’s 289.3% causing the ratio to drop from
38:1 in January 1979 to 13.99:1 at the parabolic peak for both metals in
January,1980.

Conclusions:

There are many!
Let’s look at the various price levels for gold and the various silver:gold
ratios mentioned above one by one and see what conclusions we can
draw.

First let’s use
the mid-year (June 30th, 2010) price of $1243 for gold and apply the various
silver:gold ratios mentioned above and see what they do for the potential  %
increase in, and price of, silver.

Gold @ $1243 using the current 66.77:1 silver:gold  ratio puts
silver at $18.61 (June 30/10)

Gold @ $1243 using the above 45.69:1 silver:gold ratio puts silver at
$27.20 (i.e. +46.2%)

Gold @ $1243 using the above 13.99:1 silver:gold: ratio puts silver at
$88.85 (i.e. +377.4%)

Now let’s apply
the projections made above by the various economists, academics, gold analysts
and market commentators listed above to the silver:gold ratio and see what that
suggests is the parabolic top for silver.

@ $10,000 Gold

Gold @ $10,000 using the silver:gold ratio of 66:1 puts silver at 
$150

Gold @ $10,000 using the silver:gold ratio of 45:1 puts silver at
$222

Gold @ $10,000 using the silver:gold ratio of 14:1 puts silver at
$714!!

(For what it is worth Jim Sinclair’s projection of $17,000 gold might
well mean that silver would reach a parabolic top of $1,215 per ounce based on a
14:1 silver to gold correlation.)

@ $5,000 Gold

Gold @ $5,000 using the silver:gold ratio of 66.1 puts silver at
$75

Gold @ $5,000 using the silver:gold ratio of 45:1 puts silver at
$111

Gold @ $5,000 using the silver:gold ratio of 14:1 puts silver at
$357

@ $2,500 Gold

Gold @ $2,500 using the silver:gold ratio of 66:1 puts silver at
$38

Gold @ $2,500 using the silver:gold ratio of 45:1 puts silver at
$55.50

Gold @ $2,500 using the silver:gold ratio of 14:1 puts silver at
$178.50

From the above it
seems that, any way we look at it, physical silver is currently undervalued
compared to gold bullion and is in position to generate substantially greater
returns than investing in gold bullion.

Summary

History will look
back at the artificially high silver to gold ratio of the past century as an
anomaly, caused by the dollar bubble and the world being deceived into believing
that fiat currencies are real money, when in fact they’re all an illusion. This
fiat currency experiment will end badly in a currency crisis. The wealthiest
people will be those who bought silver today and were smart enough to research
and pick the best silver mining stocks and warrants.

Indeed, while gold’s meteoric rise still has room to run,
silver’s run is yet to get started. As such, it certainly appears evident that
now is the time to buy all things silver.