Buying Mania Will Push Silver Price Much Higher As Dow Jones-Silver Ratio Falls Back Towards 50/1

Just like the current market frenzy pushing Bitcoin to new all-time highs, the same sort of buying mania will also push the silver price to new highs. Even though the silver price and precious metals sentiment have fallen considerably, the market has no clue just how undervalued the shinny metal truly is.

Very few investors realize that the Dow Jones-Silver ratio back in 1981 was 50/1.  Which means, 50 ounces of silver would buy the Dow Jones Index 36 years ago.  Today, the Dow Jones-Silver ratio is trading above a staggering 1,200/1.  Thus, it takes 1,200 ounces of silver to by the Dow Jones Index today as the ratio is nearly 25 times higher today than it was in 1981.

Of course, a large percentage of the silver price increase during the 1970’s was due to the Hunt Brothers acquiring a lot of the metal during the decade.  However, a great deal of institutions came behind the Hunts and also bought silver during the latter part of the 1970’s.  Lastly, we had the typical “Brain dead” public come in and buy at the top.  It is so unfortunate that the public doesn’t understand long term investing or wealth preservation.  Instead, they buy as much stuff on credit today and then worry about paying for it all tomorrow.

Bitcoin Hits New Highs While The Silver Price Continues To Languish

According to the article, Bitcoin Soars Above $1,600 On Relentless Japanese Buying Frenzy:

Four days ago we reported that bitcoin has surged above $1,400, hitting a new lifetime high, while rising above $1,500 on certain Chinese exchanges. Since then, bitcoin’s latest exponential rise has only accelerated, and moments ago the price of the cryptocurrency surged as high as $1,600 on the Coinbase exchange, rising as high as $1,655 on the troubled Bitfinex exchange.

We summarized the ongoing bitcoin frenzy as follows on Monday: “just as the Chinese bubble frenzy in bitcoin is fading, it may be replaced with a new one, in which thousands of Mrs. Watanabe traders shift their attention away from the FX market and toward digital currencies” and added that “If the transition is seamless, there is no telling just how far this particular bubble can grow.”

The reason the price of Bitcoin is rising so much compared to the silver price… is quite simple.  When more buying and money moves into Bitcoin, the price moves up much higher because the amount of Bitcoins outstanding are limited.  However, when a great deal of buying comes into the Silver market, the Bullion banks, such as JP Morgan, can just add more contracts.  So, the huge pressure heading into Bitcoin is released at much higher prices, while the pressure in the Silver Market is released by adding more and more contracts onto the exchanges.  So, this caps the silver price and momentum.

That being said, silver is considerably undervalued compared to the Dow Jones Index presently.  This is due to the massive amount of monetary printing and debt being funneled into broader markets.  Unfortuantely, this highly leveraged debt-based markets won’t last for long.

Why?  Because the falling oil price is gutting the entire system.  Today, the oil price has fallen a whopping $2.30 to $45 a barrel.  I can tell you, very few oil companies are making money at this price.  Without cheap and rising oil production, the STOCK, BOND and REAL ESTATE MARKETS are DOOMED.

Dow Jones-Silver Ratio Will Move Back Towards 50/1

When the world was experiencing serious inflation in 1970’s, the Dow Jones-Silver Ratio was below 50/1:

We can see this if we look at the bottom left-hand corner of the chart.  During the next 20 years, the Dow Jones-Silver ratio surged to a peak of 2,500/1 in 2001.  When the silver price spiked back up towards $50 in 2011, the Dow Jones-Silver ratio fell to 300/1.  Currently, it is trading at over 1,200/1.

Again, the reason the price of silver surged during the 1970’s was due to the tremendous amount of inflation in the oil price which impacted all commodities and precious metals.  We must remember, when the oil price hit a high of $35 in 1980, silver reached a peak of nearly $50.  However, when silver was trading at $49 in May 2011, the oil price was twice as high at $100.

Now, as I have stated several times, the price of oil will continue to trend lower in the future.  This is due to the falling net energy and its value impact upon the economy.  So, why do I forecast a much higher silver price rise if the oil price falls?  It’s due to two reasons:

  1. The tremendous amount of debt in the world is propping up most STOCKS, BONDS & REAL ESTATE.  Debt can only be kept elevated if there is abundant and cheap energy.  As the U.S. and global oil industry starts to disintegrate, debt will implode… so will the value of most stocks, bonds and real estate.  Investing looking to protect wealth, will move into gold and silver in a way never seen before in history.
  2. The Falling EROI -Energy Returned On Investment of oil means that the current way of extracting silver by the majority of the mining industry will no longer be commercially viable.  Because most of the high ore-grade silver mines are gone, trying to extract silver the old fashion way, or with a lot less energy and technology means silver supply will plummet.  With very little above ground investment silver in the world, this will cause more pressure to push the price even higher.

While I understanding the low paper silver price is frustrating by many investors, they need to understand that the current INSANE MARKET is not going to live for much longer.  Using a massive amount of debt and monetary printing to keep things going was never a long-term solution.  Now that the oil market is being gutted by a low oil price, this will help speed up the collapse of the financial system and economic markets.

Watch as more fireworks take place in China and the U.S. Markets.  This will cause demand for goods and services to fall, thus impacting demand for oil and base metals.  I see the price of copper, zinc and lead to continue falling as the markets really roll over.  As the price of copper, zinc and lead decline, this will also gut the Base metal mining industry where 56% of global silver production comes from (13% comes from gold mining and 30% from primary silver mining).

When the buying mania from the Institutions, Hedge Funds, Retail and Physical investors comes in to the market, watch as the Dow-Jones-Silver ratio falls back towards 50/1… and the silver price hits a all-time new high.

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35 Comments on "Buying Mania Will Push Silver Price Much Higher As Dow Jones-Silver Ratio Falls Back Towards 50/1"

  1. DisappearingCulture | May 4, 2017 at 5:15 pm | Reply

    “Very few investors realize that the Dow Jones-Silver ratio back in 1981 was 50/1.”

    Why was the year 1981 chosen for baseline comparison?

    Thanks,

    • DisapearingCulture,

      LOL… that’s as far back as STOCKCHARTS goes. The Dow-Silver ratio was actually lower in 1980… I believe it was 30/1.

      steve

  2. Great one Steve, was it approx. 850 DOW/$50 Silver = 17 ONLY?….thanks for your article..its always encouraging….Cheers

  3. Steve,
    Another great article. Why would anyone want to believe a binary code of 0’s and 1’s is worth $ or something tangible. At least with Silver you can hold it in your hands, not something that can be whoooshed away from a kid hacking from his basement. I always laugh that a ounce of marijuana is worth $300.00 that ‘Jack in the bean Stalk’ can throw over the back of his shoulder and grow a money tree. But an ounce of Silver is worth less than $20.00 that men have slaved in
    caves to bring to the light of air. I remember when you could look at a coin and see the silver and copper combined. Not anymore, look at a nickel, it’s very lite in weight and thin. Junk metal, that’s all that it is. Nothing tangible, read from the history of the Romans who made the denari thinner and thinner until it was a thin as a post it note. That’s why so little of the coins survived. The money system collapsed. Why do you think that the Chinese are buying as much as they can…Wake up America!

    • Why would anyone believe a bit of paper is worth a $? It’s just a paper I.O.U. with someone’s head stamped on it – backed by nothing and issued by a debt laden government.

      • This just happened : ” On Thursday, we witnessed what looked like very large capitulating selling action into the day’s lows in silver at $16.21. Just to illustrate the outrageous synthetic nature of these markets, within 2 hours of the pit open, over 4,700 tonnes of silver had been sold. To put this into context, during the Thursday Comex session, an even more ludicrous 14,000 tonnes of paper silver had been traded and 790 tonnes of paper gold had been traded. These are not markets, they are casinos. ”
        http://kingworldnews.com/andrew-maguire-jaw-dropping-4700-tonnes-of-paper-silver-sold/
        You don’t even have to try making this stuff up ! It’s being spoon rammed down our throats !!

  4. I NEVER WANT TO HEAR THE WORD BUBBLE IN REFERANCE TO BITCOIN. Bitcoin is going up because people want it, see it as a store of wealth AND IT IS ONE OR THE FEW THINGS IN THE WORLD THAT ARE NOT MANIPULATED BY THE BANKSTERS.

    • Malcolm,

      I agree. I don’t think Bitcoin is in a bubble. It find it hilarious that they call Bitcoin a Bubble when 99% of the market is a bubble.

      steve

      • Crypto Currencies are a ruse to lure people into a faux FIAT mechanism that is controlled and reviewed by the major banks, governments and spy agencies. It serves the purpose of distracting those who would have alternatively considered gold and silver as a mean to escape the DEBTFIATPONZI WORLD. There is more in cryptos than the entire annual valuation of silver. Silver is left at the side of the road while owners of cryptos ride in limos. Pretty seductive IMO

        Why are cryptos going through the roof?

        Fear trade Greed Trade.

        People are bidding up cryptos like they’d bid up precious metals if that was the means to conceal some modicum of wealth in face of the obvious nature of the world’s troubles. Gold and silver are being suppressed to allow the really wealthy people, central banks and governments to buy PMs by the truck load. We are give crypto currencies as a ruse to distract and deceive, like showing a hound dog a squirrel to get him off the scent of the real objective

        People who get into cryptos may be smart or stupid but they share one common trait. They are easily duped.

        • Cool story bro. Keep stacking your silver. I’ll keep stacking silver AND Bitcoin. Hopefully we will both be very happy with our decisions in 5 years.

      • Mugs, buying bitcoin, which is a dollar derivative. A dollar is worth 2cents in the dollar in natural value, a bitcoin is worth problably near zero and it will go there.

    • DisappearingCulture | May 5, 2017 at 7:14 am | Reply

      Bitcoin is a store of wealth? PLEASE.
      Not manipulated, or able to be manipulated? Again you fool yourself.How about shut down when the powers that be decide to? Right now it is just a lab rat they are observing, to see what they want to do on the way to a cashless society.

      • Bitcoin might go to ZERO. But it might go to tens of thousands or more. Really though, you sound mad that Bitcoin has doubled in the last 12 months, while silver has plummeted recently.

        Frankly I share your frustration though, as I have quite a bit of my net worth in metals.

    • “bitcoin is the 21st centuary tulip bulb and it will end the same way.

    • Gordon Duncan | May 9, 2017 at 1:16 am | Reply

      I don’t think Tulips were “manipulated by Banksters” in the early 1600’s either. Look what happened then!
      Sheer greed always fuels bubbles in any market you can think of.

  5. Steve,
    Could you please write and article about Silver Eagle Sales so far this year? I know it’s down, but it would be nice to get an update for ol’ times sake. Also, are the Saudi currency reserves still headed down? Thanks!

    • Rob,

      At some point I will. However, Silver Eagle Sales are running about 25% what they were last year. They have fallen that much. Matter a fact, April Silver Eagle sales were 835,000, versus 4.1 million last year. So, yes… a big drop because people are believing the TRUMP HYPE.

      Also, the Saudi’s did liquidate another $4 billion or so of their Foreign Exchange Reserves in March. I don’t have the exact figure as I have to do some currency exchange calculations…. but they are still liquidating.

      steve

  6. What will happen to the large it companies when the economy disintegrates? Will they still be able to provide the necessary maintenance on the worldwide communication networks when their income is cut in half? And how will that impact BTC transactions? Everybody has got a plan, until they get punched in the face.

    • “Will they still be able to provide the necessary maintenance on the worldwide communication networks when their income is cut in half?”

      no.

      more specifically, the “global elite” “international financiers” “deep state” will maintain their own networks, and shut down everyone else’s. and by “networks” is meant communications, oil, troops ….

  7. Enough evidence has been made forthright to justify Bitcoin a disaster waiting to happen , again ! Two words prove it : Mount Gox .

    https://www.wired.com/2014/03/bitcoin-exchange/

  8. joe lindell | May 5, 2017 at 7:20 am | Reply

    Good show Steve! The supply demand numbers are what drives the silver price. From those who
    prognosticate the 1.2 Billion Muslims didn’t clamor for silver. Blaming the strong dollar for
    silver at $16.50 isn’t the answer because the dollar was much stronger a few months ago. Peak
    oil didn’t move it, EROI had no effect and economic catastrophe didn’t occur. There is no hyperinflation like Venezuela, nor has the Fiat currency been devalued dramatically. The
    problem is people aren’t investing into silver. A fear of a Korean, Iran or Russian war has had no effect. We must see mining decline and and add few million people to the silver customer list,then, silver will rise. Don’t watch the paper market watch the lead times and industrial numbers. Agencies like the Silver Institute are laggards. It is almost 5 months into 2017 and they have not yet reported 2016 results of supply/demand.

    • Joe Lindell,

      When are you going to say something different…. LOL.

      steve

      • joe lindell | May 6, 2017 at 6:47 am | Reply

        What are you doing with the dow /silver ratio? If the market falls 20% the ratio will improve, but will silver price rise? You make your points with charts etc. but you avoid that which will make the price of silver rise and that’s demand. The fact that you mention Bitcoin proves it. Money that could go into gold and silver is in Bitcoin. You’ve written articles about many things that cause silver to rise or fall but the fact is, the answer is supply/demand. Write an article that gets people to buy silver, then see what happens.

        • DisappearingCulture | May 6, 2017 at 7:19 am | Reply

          “Write an article that gets people to buy silver, then see what happens.”
          I don’t think anyone can do that…unless they are a mainstream media figure. Obviously if the Fed, treasury, NBC, CNN, or big-name politician issued a dire warning warning of why it was imperitive to buy silver that would be different. But that is out of their paradigm OR they [corporate or as individuals] are buying metals privately. Silver is the bastard son from a fling in Las Vegas…and there is the hope it will stay there.

  9. Silver is going down as China needs a low price so their exports that contain can be marketed and sold worldwide. They have ring fenced metals. They created the SGE to funnel metals thru the exchange and then they are distributed to their huge industrial and manufacturing base and large wholesale jewelers. They accomplish this by placing a 17% VAT on import metals that do not flow thru the SGE and of course with their own twice a day metals fix or auction. It is also no accident that the Chinese bank ICBC Standard Charter is part of the LME in London which is the futures metals market. Who owns the LME? Hong Kong Exchange and Clearing LTD. It is also no accident that the Hong Kong and Shanghai Banking Corporation is part of the London metals fix on the LBMA which is the physical market.
    Silver has been going down because world trade has been slowing. Silver demand is industrial, manufacturing and retail jewelry and this is from 70 to 89% of demand. The monetary demand is simply too small to effect price and this demand can never make up the difference in demand when industrial demand drops.

    • El que no acepta mulas | May 5, 2017 at 1:05 pm | Reply

      Industrial demand is growing (fact even accepted by Kitco)

    • I appreciate you short term insights. Why do you mention LBMA as ‘the’ physical market? Everyone knows claims are at least 200/1. ?

  10. Something is up with silver.

    http://didthesystemcollapse.com

    Since yesterday.

  11. The price of Silver is determined by supply & demand. There is plenty of supply so prices are low.
    Silver’s use as money is from the past and wont return. The future is in technology like crypto currencies and digital money. It wont be long before cash is extinct as more and more people go cashless.
    Gold & Silver proponents want to go back to the past but we can’t. We will be going to the future. They also say the economy will collapse, debt is too much, etc. and only Gold & Silver will save you. The truth is the economy is doing OK, jobs are being created, etc.

    • We won’t go back to the past. We will go back to the future.

      One don’t create jobs like currencies. Out of thin air.

      Another paid troll on minimum wage without arguments.

    • Stuart,

      I gather you haven’t read one of my ENERGY ARTICLES…. LOL. Unfortunately, that sort of thinking will not get you prepared for what’s coming. However, you are more than welcome to believe that EVERYTHING IS FINE. Don’t blame you… most Americans are DELUSIONAL.

      steve

  12. Gold will to 5000 , 10000 usd , silver price skyrocket to 100 usd . I have read this for several years but the reality is that the Price are always steady Or down.
    So i decide to sell all my gold and buy cryptocurrency , my revenue is up 400% in only one month .
    Never we will see this money investono in gold Or silver.
    Sorry for my english i am old italian man with very little school.

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