David Morgan, a.k.a. the Silver Guru, who has at least 40 years of experience in the silver sector, is of the opinion that silver might outperform gold with a factor of up to 5 based on historical price ratios.
David Morgan is of the opinion that the silver price presents a good buying opportunity at current levels, based on two things: Firstly, stock market action, and secondly, a little bit of reality setting in after the U.S. elections. He expects that the stock market will go down, while the metals could trade side wards or even higher. The reason for this, according to him, is because of the different mind sets of those who buy physical gold/silver vs. those who buy paper gold/silver such as mining stocks. Generally speaking the physical metal is a hedge that’s outside the system, especially considering that gold is the most negatively correlated asset to the stock market. This while gold stocks at least initially do what the stock market does, because gold stocks are stocks after all. So if we have a big sell off in the general equity market, gold stocks generally tend to go up or down with the general market. Once that’s completed, you will normally see gold stocks turn around before anything else. An excellent example of this is the 2008 financial crisis when gold stocks got hammered with everything else, but the first turn around was the mining equities, the gold stocks. They picked up very early while the general market only picked up months after that. David explains that there is money to be made with gold stocks if one is savvy enough to know when to get in and when to get out. With this in mind, he expects the overall trend in the stock market to be down in 2013. This is despite the fact that it is now the 12th consecutive year that one could have outperformed the stock market by holding metals, namely gold and silver, from the beginning of the year. This is of course something that’s largely ignored by the mainstream media; they only give gold and silver a mention when the prices are going down. This is despite the fact that silver has so far been the best performer over Obama’s term compared to all other asset classes, something the mainstream has chosen to completely ignore. The truth be told, despite its phenomenal performance, silver has not been up every year in a row, but gold has been up every year for 12th consecutive years, including this year. Despite this, it is believed that silver will outrun gold. David is of the opinion that silver will outrun gold by the time the market tops out with a factor of 2-3 conservatively, and possibly as high as 5. David doesn’t sell this as fact, but rather a possibility backed by history. He mentions the historic monetary ratio (or gold to silver ratio) of 1:16 and compared it to the current ratio of more or less 1:52, using that as a basis for the possibility that silver might outperform gold by the mentioned factors. This means that silver is expected to make greater percentage gains in terms of price than gold. It is of course recommended, if possible, to hold a combination of both physical gold and silver, especially if one considers that in terms of historical inflation adjusted prices both gold and silver still has a long way to run. Therefore, those who come out and say that they’re too late to reap the benefits offered by gold and silver ownership, are in reality not too late, they should put the thought of being too late to rest.
David suggests that one takes profit somewhere along the way up, before the market’s proverbial bottom falls out, but hard core silver stackers are of the opinion that there is a better way to play it this time around. They are of the opinion that the ounces of physical silver owned are going to be the prevailing measure of wealth at the end of the day, not fiat paper profits of any sort. This makes sense to at least some extent if one considers the continuing collapse of fiat currencies across the globe, led by the world fiat reserve currency, the U.S. Dollar (the Federal Reserve Note). Balance is of course key, especially when we get to a stage where we need additional fiat to pay the bills and to keep head above water so to speak. Thus, it is recommended to take some fiat profits along the way, but don’t sell the bulk of your gold or silver on the account of fiat profits (which constantly lose purchase value). This being said, David is of the opinion that we still have 4 years ahead of us before we will see the top of the market as expressed in fiat currency terms.