As a Kitco News report explains, gold and silver typically move in tandem with one another, but the latter can go higher when in the midst of a bull market. With silver hovering at about $24 per ounce now, a move to a $100 could be of benefit to certain silver exchange-traded funds (ETFs).
"Assuming a $4,000 gold price target in two to three years’ time, which is roughly a 100% increase from current levels, and assuming a normalization of the gold-silver ratio to 40-1, then silver should be trading at $100 by the time gold doubles in value, said David Morgan of TheMorganReport.com."
“The last time we had that run in silver in 2011, we’ll look at something similar, so at that time it got to about 33 to 1, so if we $4,000 gold and we use a ratio of 40 to 1, that says $100 silver. Is that out of the question? I don’t think so. I actually forecasted that price back in 2003 when silver was under $5, so I think we’ll see that,” Morgan said. “I’m not saying next year, but we’ll see that.”
Silver's Historical Record
The last time silver hit $50 was back in 1980. It happened again in 2011.
“What was in place in 2011 was that QE2 was announced,” Morgan said. “What was in place was that people thought that inflation was going to come…but that’s not what happened, and that’s why silver went to that peak and went back down and really went nowhere except down for the ensuing several years.”
Inflation is also showing signs of ticking higher, to silver's benefit.
“Gold is the best in a deflation, silver has mixed results, but in inflation there’s nothing better than the silver market,” he said.
ETF investors looking to get in on the silver action can look to funds like the iShares Silver Trust (SLV). SLV seeks to reflect generally the performance of the price of silver. The Trust seeks to reflect such performance before payment of the Trust’s expenses and liabilities. It is not actively managed. The Trust does not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of silver.
Another fund to consider is the Aberdeen Standard Physical Silver Shares ETF (SIVR). SIVR seeks to replicate, net of expenses, the price of silver bullion. The shares are backed by physical allocated silver bullion held by the custodian. All physical silver held conforms to the London Bullion Market Association’s rules for good delivery.
Another fund to consider as a backdoor play on silver is via miners in the ETFMG Prime Junior Silver Miners ETF (SILJ), which recently surpassed the $300 million in assets. The fund seeks investment results that correspond generally to the price and yield performance of the Prime Junior Silver Miners & Explorers Index.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.