Why you must buy silver now (Stockhouse)

Based on the long-term historical average ratio, with the price of gold around $1,725, the price of silver should be around $108


Many investors believe gold is a hedge against inflation. And that's true... but that's not the real secret of gold...
The real purpose of gold is to hedge against government hubris.
I won't get into a political analysis today – you get enough of that in the paper and on TV. But surely you can see that around the world, the role of government is at the top of a huge period of expansion...
Around the world, governments have promised their citizens a level of economic security in the form of pensions and health benefits they cannot possibly afford.

Today, not very many people understand the fallacy of these actions... or their inevitable collapse. But... over time... more and more people will begin to doubt the solvency of their governments and the practicality of their schemes.

If the government can't pay its bills... why am I saving its dollars? If I can't depend on the government to protect me and my family, how will I pay for protection... for health care... for energy...?

When people have tangible evidence that something has gone badly wrong with the economy, they begin to hedge against it. They hoard real assets. Rich people hoard gold and silver.

Hedging is like buying life insurance. You don't buy life insurance as an investment, except maybe as a tax strategy... but that goes beyond this metaphor. In general terms, you buy insurance so that if something terrible happens, your family will have something to live on.

Likewise, you should have some exposure to gold and silver in your portfolio. And no, it's not too late to buy some...

What you want in a hedge is a lot different than what you want in an investment. With an investment, you need something that is stable, hopefully provides a yield, and isn't going to drive you crazy with volatility.

Silver is none of these things. But it is a perfect hedge because when things go wrong economically – when there's a crisis – the price of silver goes bananas.

Why? Because of the gold-to-silver ratio.

Historically, the price of gold has been around 16 times the price of silver. So for example, based on the long-term historical average ratio, with the price of gold around $1,725, the price of silver should be around $108. It's not, of course. It's around $32.

Today then, the silver ratio is more like 54. What explains the difference between hundreds of years of history and today? Simple – demand for silver as money. During periods of history when silver has been used as a currency, it has almost always been valued around 1/16th the price of gold.

When silver has been "demonetized," supplies soar as people sell silver for gold and currency. On the other hand, during periods of monetary crisis, the price of silver tends to increase far more than the price of gold as demand for silver is once again created by monetary needs.

This influences the silver-to-gold ratio heavily in silver's favor. For example, the ratio returned to its historic range (16) during World War I. It happened again in the early 1970s, when Nixon abandoned the gold standard. It also happened most famously in 1979-1980, when gold briefly soared to $800 an ounce and it seemed as if America was really entering a severe money crisis.

Silver is the best hedge against a money crisis because its price will increase many more times than gold as the gold-to-silver ratio reverts to its historic average. Silver will once again be worth 1/16th the price of gold. It is now worth only around 1/54th.

Back in 2006, with gold trading for around $650 an ounce, I set a target at $2,000 an ounce. We're nearly there. A $2,000 gold price divided by the historic silver ratio of 16 sees the price of silver at $125 per ounce – about four times the current price.

Given this perspective, I hope you see why silver's move from around $15 an ounce to over $30 in the last three years is only the very early signs of a money crisis. It's going much, much higher.

Even if you think I'm nuts, it's still a good idea to hedge your portfolio from the currency risks I believe are very real. You can do so easily and safely by taking a position in silver today.

Read more at http://www.stockhouse.com/columnists/2012/oct/23/why-you-must-buy-silver-now#ZCiAgFbmbX8wyIXm.99

Gold Forecast: 2013

Gold Rerated as a Zero-Risk Asset

By Christian DeHaemer
Thursday, October 11th, 2012

Sour economic news has caused the price of gold to spike.

There are civil wars in the Middle East. U.S. diplomats have been murdered in Libya. And the second and third largest economies on earth — Japan and China — are slap-fighting over a pile of rocks in the middle of the Pacific, causing Japanese car sales in China to fall by half.

The list of concerns seem endless...

Greece, Italy, Spain, Portugal, and now even France are on the brink of economic and political Ragnarök.

The United States is mired in debt and malaise of comparable proportions — and yet it has produced an election where the leading candidates exchange catty remarks over a giant yellow Muppet named Big Bird.

Fascism by Another Name

These are historic times with serious global problems, and in the face of all this we humans remain leaderless, divisive, and lost.

In response to years of high-risk gambling that failed, the large multinational banks and their cronies at the various central banks have been crushing CRT+P on their secure black laptops, adding zeros and printing currencies with abandon.

The International Monetary Fund recently downgraded global growth, saying: “Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action.”

This is banker-speak for “print more money.” It is self-serving cronyism at its best.

If you make more of something, it becomes less valuable — end of story.

History is replete with the horrific ramifications of currency debasement. (Remember, the hyper-inflation of the Wiemar Republic puked out Hitler.)

Fascism is the marriage of corporations and government — in other words, cronyism kicked up a notch.

I am reminded of the great Yeats line: “And what rough beast, its hour come round at last, / Slouches towards Bethlehem to be born?”

The Greek Nazi party recently gained 21 seats in Parliament and won 7% of the vote.

But it is not the end of the world yet, my friends. We have some fight left in us...

more.... http://www.wealthdaily.com/articles/gold-forecast-2013/3715

Schiff: Gold Fits All Market Environments

By Cinthia Murphy
October 11, 2012

When it comes to gold bulls, perhaps none is more strident that Peter Schiff, and the head of Euro Pacific Capital was in fine form Wednesday as he took the Federal Reserve’s easy-money policies to task, saying they are fueling an unstoppable gold rally and won’t do anything to spur U.S. growth.

Speaking at IndexUniverse’s Commodities conference in Chicago, Schiff argued that the Fed’s zero-interest rate policies and its ongoing quantitative easing will do more harm than good for an economy burdened by hefty loads of debt and heading for gale-force inflationary head winds.

“The Fed has said it will keep printing money until we have more jobs. That means we are going to be printing money until we have an economic crisis,” Schiff said during a panel on precious metals at the one-day conference that was held at the Ritz-Carlton on Wednesday, Oct. 10

“The closest thing I know to being a sure thing is that the U.S. dollar is going to depreciate,” Schiff said in a panel discussing the outlook for precious metals. He said that faced with a weakening outlook, gold and other precious metals are a perfect hedge against loss of purchasing power.

Last summer, before the Fed said it was launching its third round of quantitative easing, or QE3, Schiff said he had no doubt the Fed would implement QE3, and stressed that he reckoned gold would eventually reach $5,000.

Gold prices did rise ahead of the Fed’s “QE3” announcement in September—from $1,550 to $1,730 a troy ounce—but that rally stalled since the central bank said it planned to buy $40 billion in mortgage-backed securities per month indefinitely. Still, because of QE3, many gold analysts are confident gold will eventually break through $1,800 an ounce

more http://www.indexuniverse.com/hot-topics/14793-schiff-gold-fits-all-market-environments.html?fullart=1&start=2

Deutsche Bank lifts 2013, 2014 gold-price outlook

Oct. 2, 2012, 4:02 a.m. EDT


By Francesca Freeman

Deutsche Bank AG DB +1.41% Tuesday raised its outlook for gold and silver prices in 2013 and 2014, citing support from stimulus measures by central banks such as the U.S. Federal Reserve.

The bank raised its 2013 gold forecast by 3% to $2,113 a troy ounce and its 2014 outlook by 11.1% to $2,000/oz. Next year, the price of gold could exceed $2,200/oz, it said.

Similarly, Deutsche Bank increased its 2013 outlook on silver by 3% to $44/oz and its 2014 forecast by 11.1% to $40/oz.

A major support for precious metal prices are the recent moves by central banks to expand their balance sheet, said the bank. Since gold is often sought as a hedge against currency weakness and inflation at times of loose monetary policy, such moves tend to boost its appeal to investors.

"We believe central bank action to stimulate growth, avoid deflation and reduce systemic risk is unambiguously bullish for the precious metals sector and specifically gold," said Michael Lewis, a research analyst at Deutsche Bank.

"While we have targeted gold prices moving above $2,000/oz since the beginning of 2011, we believe the Fed's open-ended program of QE announced last month increases our confidence that a surge in the gold price above this level is only a matter of time," he added.   http://www.marketwatch.com/story/deutsche-bank-lifts-2013-2014-gold-price-outlook-2012-10-02?reflink=MW_news_stmp