Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17
7 Signs You Should Add Gold To Your Portfolio Now - 19th Jun 17
US Bonds and Related Market Indicators - 19th Jun 17
Wireless Wars: The Billion Dollar Tech Boom No One Is Talking About - 19th Jun 17
Amey Playing Cat and Mouse Game with Sheffield Residents and Tree Campaigners - 19th Jun 17
Positive Stock Market Expectations, But Will Uptrend Continue? - 19th Jun 17
Gold Proprietary Cycle Indicator Remains Down - 19th Jun 17
Stock Market Higher Highs Still Likely - 18th Jun 17
The US Government Clamps Down on Ability of Americans To Purchase Bitcoin - 18th Jun 17
NDX/NAZ Continue downward pressure on the US Stock Market - 18th Jun 17
Return of the Gold Bear? - 18th Jun 17
Are Sheffield's High Rise Tower Blocks Safe? Grenfell Cladding Fire Disaster! - 18th Jun 17
Globalist Takeover Of The Internet Moves Into Overdrive - 17th Jun 17
Crazy Charging Stocks Bull Market Random Thoughts - 17th Jun 17
Reflation, Deflation and Gold - 17th Jun 17
Here’s The Case For An Upside Risk In The Global Economy - 17th Jun 17
Gold Bullish on Fed Interest Rate Hike - 16th Jun 17
Drones Upending Business Models and Reshaping Industry Landscapes - 16th Jun 17
Grenfell Tower Cladding Fire Disaster, 4,000 Ticking Time Bombs, Sheffield Council Flats Panic! - 16th Jun 17
Heating Oil Bottom Is In.(probably) - 16th Jun 17
Here’s the Investing Reason Active Funds Can’t Beat Passive Funds—and It Worries Me a Lot - 16th Jun 17
Is There Gold “Hype” and is Gold an Emotional Trade? - 16th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

Silver Prices in Five Years?

Commodities / Gold and Silver 2016 Feb 29, 2016 - 12:25 PM GMT

By: DeviantInvestor

Commodities

What will the price of silver be in 2021?  You can find articles suggesting the price of silver will be over $1,000 and under $10.  Perhaps this is the wrong question.

A better approach:  The global financial system is increasingly unstable and fragile, more so than in 2008.  The important question is: How will governments, central banks and financial systems respond to the ongoing crisis?  Future prices for silver are dependent upon the answer to that question.  I suggest three possible scenarios.


Scenario One – status quo:  The next five years could look much like the last 20 years.  Politicians spend too much money, debt expands exponentially, central banks monetize debt and desperately inflate and reflate bubbles to maintain their power and continue the transfer of wealth from the many to the few.  This is “status quo” or “more of the same” and indicates that silver prices will rise substantially, but not in a hyperinflation.

Scenario Two – deflationary crash:  Deflationary forces overwhelm the financial system and central bankers and politicians can’t or won’t reverse those deflationary forces.  In that scenario most paper assets crash while the purchasing power of silver increases far more.  Central bankers will do almost anything to avoid this scenario.

Scenario Three – deflation and hyperinflation:  Deflationary forces temporarily crash the financial system (signs are visible in 2016-Q1), and eventually central bankers and governments inflate currencies, possibly to hyperinflationary levels in their heavy-handed reaction.  In this scenario silver prices will go into the stratosphere – perhaps $150, or $1,500, or $15,000 per ounce.  The ultimate silver price in a hyperinflationary scenario is unpredictable since hyperinflationary forces feed upon themselves and destroy purchasing power unpredictably.  Gold reached nearly 100 trillion Weimar Marks per ounce in 1923.  Gold, if currently priced in 1945 (pre-devaluation) Argentina pesos would be over 10,000 trillion 1945 pesos.  Hyperinflation is an ugly, destructive, and unpredictable process.

In Scenario One – more of the same – we can reasonably expect:

Politicians and central bankers will manage the crisis of 2016-2017 as they have most other crises (such as 1987, 1998, 2000, 2008) by increasing spending, addressing an excess debt problem with even more debt, and pumping more “funny money” into the global financial system.

  1. Official US national debt increases more rapidly than its typical 9% per year compounded rate. (perhaps 10 – 12% per year)
  2. Dollars, euros, yen and other currencies devalue against each other and against real assets. (currency wars)
  3. Stock markets collapse further, and then, buoyed by central bank “printing” and currency devaluations, will rise.
  4. Depressed commodity prices will move much higher as currency devaluations are aggressively pursued by central banks.
  5. People and investors eventually realize that currencies are devaluing and they must avoid over-valued bonds, negative interest rates, crashing stock markets, and paper promises to preserve their savings. Silver and gold prices will rally much higher based on increased investor demand in a supply constrained market.

Given the above “status quo” scenario, the VALUATION model I developed for silver prices over the past century is relevant.  The model is based on three variables, the official US national debt, the price of crude oil, and the Dow Jones Industrial Average.  I used smoothed silver prices over the last century to filter out short term fluctuations to highlight the basic trend of silver prices.  Note the correlation of the “calculated silver” price with the actual smoothed silver prices.

This valuation model works well within a broad range of economic conditions, including stock and bond bull markets, bear markets, crude oil bubbles and crashes, various forms of Quantitative Easing, Democratic and Republican Presidents, wars, and occasional peace.  The Excel calculated statistical correlation over 100 years is 0.95.

Using “status quo” assumptions for future increases in official national debt and crude oil, and a collapsing Dow Jones Industrial Average, (similar to the collapse of 2008) I created the following graph of “calculated silver” prices for the next several years.

This is a valuation model so prices can, for months at a time, drop below the calculated value by perhaps 30% and spike higher by 100 – 200%.  Given the “calculated silver” price in the year 2021 of approximately $50 per ounce, a spike higher could easily reach $100 – $150 per ounce without hyperinflation.

Regarding Scenario Three:

Hyperinflation and massive currency devaluations, which could occur, would invalidate the above “status quo” model and suggest that silver prices could reach four digits and higher.  Crazier things than $1,000 silver have occurred and will happen again.  Example:  The price of gold in Argentina pesos, adjusted for devaluations since 1945, would be in the thousands of trillions of pesos per ounce.

CONCLUSIONS:

  • How crazy will it get? The future price of silver is very much dependent upon the reactions of governments and central banks regarding the current deflationary pressures.
  • Status quo response: $100 per ounce (or more) is plausible at some time in 2020 – 2022, if not sooner.
  • Deflationary crash response: Silver will substantially increase in purchasing power, but the price in dollars, euros, yen, etc. is difficult to predict, depending upon the economic damage that occurs.
  • Hyperinflationary response: The price of silver will be unbelievably high.

I encourage you to purchase my book, “Gold Value and Gold Prices From 1971 – 2021.”  It describes my empirical gold model which is similar to the above described silver model.  That book is available for $11.00 in paperback at www.gechristenson.com and Amazon.  E-books are also available.

Protect your assets.  Purchase physical gold and silver from Tom Cloud or Roxanne Lewis.

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2016 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife