Best of the Week
Most Popular
1.Trump Delirium Triggers Stock Market Brexit Upwards Crash Towards Dow 20,000! - Nadeem_Walayat
2.The Future Price Of Gold Will Drop Below $1000 In 2017 -InvestingHaven
3.May Never Get Another Opportunity to Buy Gold at this Level Again - Chris_Vermeulen
4.Delirium - The Real Reason Why Donald Trump Won the US Presidential Election - Nadeem_Walayat
5.Why Nate Silver / Fivethirtyeight is one of the Most Reliable Election Forecasting Indicator? - Nadeem_Walayat
6.Gold Price Forecast: Nasty Naughty November Gold Price Trend - I_M_Vronsky
7.Gold Mining Stocks Screaming Buy! Q3’16 Fundamentals - Zeal_LLC
8.Delirium of Trump Mania Win's Mr BrExit US Presidential Election 2016 - Nadeem_Walayat
9.The War On Cash Goes Nuclear In India, Australia and Across The World - Jeff_Berwick
10.Hidden Signs for Gold and Silver - P_Radomski_CFA
Last 7 days
Gold And Silver – Do Not Expect Much Difference With Trump Compared To Obama - 3rd Dec 16
Gold, Currencies and Markets Critical 61.8% Retracements - 2nd Dec 16
Gold Junior Stocks Q3’16 Fundamentals - 2nd Dec 16
Adventures in Castro’s Cuba - 2nd Dec 16
We Are Putting Off the Inevitable - 2nd Dec 16
Macroeconomic Cycles & Demographics - A Fuse, An Explosive and The Igniting Catalyst - 2nd Dec 16
How Moving Averages Can Identify a Trade - 1st Dec 16
Silver Prices and Interest Rates - 1st Dec 16
America, is it Finally time for us to say Goodbye? - 1st Dec 16
Blockchain Technology – What Is It and How Will It Change Your Life? - 1st Dec 16
Burn the Flags, Can Trump Salvage The Sinking US Economic Ship? - 1st Dec 16
Will US Housing Real Estate Market Tank in 2017? - 1st Dec 16
Referendum Puts Italy's Government to the Test - 30th Nov 16
Why We Haven’t Seen Gold Price Rally after Trump Victory - 30th Nov 16
Breakdown and Slide in Crude Oil Price - 30th Nov 16
A 'Wicked Rally' in Gold Price Predicted - 30th Nov 16
Silver Market Sentiment Looks Golden - 30th Nov 16
Indian Demonetization Denotes Severe Stress in the Global Gold Market - 30th Nov 16
Owning Gold and Silver in Troubling Times - 29th Nov 16
Trump's Presidency - Stock Market Crash or Start of New Mega-Trends - 29th Nov 16
Prime Minister Modi's War Against Corruption, Black Money and Fake Currency Notes in India - 29th Nov 16
Can President Trump Really Drain the Swamp? - 29th Nov 16
President Trump’s Economic Plan Isn’t Going to Work - 29th Nov 16
The US Bond Bear Market Has Begun! - 29th Nov 16
Simple Yet Powerful Technical Trading Tools - 28th Nov 16
Public Infrastructure – Welcome to the World of Waste, Fraud, and Abuse - 28th Nov 16
Fifty Years Later, Moore's Computing Law Holds - 28th Nov 16
An Elusive Stock Market Top - 28th Nov 16
This Past Week in Gold - 27th Nov 16
Italian Bank Collapse European Sovereign Bond Carnage, Criss-Crossed Fuses & Lit Bonfire - 27th Nov 16
How to Beat UK Savings Crisis with Child Junior Cash ISA, Pension's and Life-time ISA - 27th Nov 16
Castro Was Not Who You Thought He Was - 27th Nov 16
Understanding the Trump Presidency , Beyond Merkel - 26th Nov 16
US Stocks Bull Market New All Time Highs - 26th Nov 16
Silver Mining Stocks Q3 2016 Fundamentals - 26th Nov 16
MSM's Stock Market Druck'n Suck-In Continues - 26th Nov 16
Gold Price Down 13.5% In 13 Days - Opportunity For Geometric Price Cost Averaging - 26th Nov 16
Tips for Trading Options with Elliott Waves - 26th Nov 16
Germany Pulls the Plug on Market Oracle site for 24 hours, German Election BrExit GerExit Warning Shot? - 26th Nov 16
New NS&I 2.2% Savings Bond Ahead of 2017 Stealth Inflation Theft of Purchasing Power - 24th Nov 16
Establishment Controlled Mainstream Media Launches War on Alternative 'Fake' News - 24th Nov 16
Black Friday Cheap Christmas Lights, How Long do they Last ? B&M Stores Review Video - 24th Nov 16
War On Cash Goes Global – India and Citibank In Australia - 24th Nov 16
Stocks, the Politically-Driven S.O.D. to Lose Again - 24th Nov 16
One of the best buying opportunities in history? - 24th Nov 16
Gold and Monetary Populism: The Oligarchs’ Mortal Enemies – The Peoples’ Salvation - 23rd Nov 16
The Winners and Losers of a Global Trade War - 23rd Nov 16
Why Mexico’s Oil Reform Is A Huge Opportunity For Investors - 23rd Nov 16
Silver and Gold - We Can’t Understand It for Them - 23rd Nov 16
A Review of Nedbank Private Wealth - 23rd Nov 16
Trump’s Financial Revolution! - 22nd Nov 16
Stock Market New All Tiime Highs & the Election Buried This HUGE Story - 22nd Nov 16
Will Crude Oil Price Rally to $50? - 22nd Nov 16
The Spreading Bondfire And The Rising Price Of Gold - 22nd Nov 16
Did The 'Trump Tantrum' Just Trigger The Next US Recession? - 22nd Nov 16
Cheap Money to Continue Flowing & Helicopter Money to Start after 2017 Market Crash - 22nd Nov 16
Gold Price Forecast: Nasty Naughty November Gold Price Trend - 22nd Nov 16
Stocks and Deby - Will Trump Bring Morning or Mourning in America? - 22nd Nov 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

$10000 Gold

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

© 2005-2016 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