A week ago on NIAnswers we said, "The gold/silver ratio has declined during the past year from 70 down to 32. We projected it to decline to 38 this year, so there is a chance silver has run too far too fast. It wouldn't surprise us to see a large dip in silver prices with the gold/silver ratio bouncing back up to 40. However, we are 100% sure that the gold/silver ratio will decline to at least 16 this decade. Therefore, we think silver is a buy here for the long-term, but it is probably best to be buying gold here even more heavily than silver so that if silver dips in the short-term, you can sell some gold to buy more silver."
With gold now at $1,503 and silver at $36.81, the gold/silver ratio is now back up to 40, which is exactly what we predicted would happen a week ago when the ratio was 32.
With a gold/silver ratio of 40, silver is starting to once again become very attractive. Silver will likely remain very volatile in the short-term, but it is best for us to ignore this short-term noise and focus on the long-term. There is simply no better asset to own during hyperinflation than silver. We are 100% sure that the gold/silver ratio will return to its historical average of 16 within the few years, which means that those who buy silver today will see a 2 1/2 increase in their purchasing power.
Most of the people who are taking profits on silver today are going long U.S. dollars, which is the riskiest asset of all. Even though we knew silver was going to dip, we didn't sell any of our silver. We simply stopped buying silver in recent weeks and focused on accumulating gold. If silver continues to dip in the short-term, we will strongly consider selling some of our gold and using the money to buy a lot more silver.
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