Thursday, September 3, 2009

Gold is good but silver is ... too cheap!

I know I've been talking mostly about gold but the real money is going to be made in silver.

The above chart is the ratio of gold to silver. During the crash last fall silver got simply destroyed. Unjustly so I might add. But then silver is a thin market so these kind of swings are to be expected.

Historically silver should trade at about a 20-30 to 1 ratio compared to gold. As of yesterday it still took over 60 oz. of silver to buy 1 oz. of gold. Just like mining stocks silver is stupid cheap.

Ultimately I expect we are going to see another 400-500% gain in gold before this bull market is finished. Silver on the other hand will probably double those gains or more as it works its way back down to a more "typical" valuation compared to its big brother gold.

Now remembering what I said about mining stocks being cheap, what does that say about silver miners?