They say that the best predictor of the future is the past. Recently, gold was just short of $2000 an ounce; this represents a 27% increase this year alone. It begs the question, how high can silver and gold climb? Investors are interested in how much return they can realistically expect on these two precious metals. The other question that begs answering is which of the two precious metals will make the best investment? To answer these questions it might be wise to look back to the eighties when gold was a similar high, taking inflation into account.
Measuring inflation on the CPI-U, which is the government’s method of measuring inflation, shows us that gold is not far from the high of $850 an ounce that it was in 1980. Silver is not quite there as it still has some way to go. It is however believed that the CPI-U is not the best way to gauge inflation and that John Williams’ Shadow Government Statistics calculations are a far better way to do this. This information is much nearer to the situation in the real world as there is little or no room for manipulation of data.
Using the mentioned formula it is obvious that investors will yield an incredible return on their investments in gold and silver. Right now, figures are high. However, they are far from what could actually be the case. If we look at the percentage gains in the seventies, at the time gold rose 2333% and silver jumped an astounding 3646%. By comparing figures then and now, it is possible to estimate what returns can be expected on silver and gold today.
Comparing the performance of silver and gold back then and now, it is apparent that silver could give investors a quadruple return and gold could increase by 2 1/2 times. However, the numbers are irrelevant, as it is more than obvious that if these two precious metals mimic performances of the past, then they could easily attain the predicted price levels despite rampant gold and silver market manipulation. The reality is that while the economy was floundering in the 70s, it was nowhere near what the situation is like now. The creation of fiat currency (non-redeemable paper notes, electronic currency) and the debt crisis has reached epidemic proportions since the 70s. It is for this reason that the bull market in precious metals should be far from over. Investors need to protect their monetary wealth by accumulating precious metals such as silver and gold, because both represent real money, especially in the form of gold and silver coins.
Despite persistent claims by the mainstream media that both gold and silver are in a bubble, it is certainly not the case. A bubble will not occur until people truly begin buying and selling gold and silver. It is after all no secret that the bulk of investors still have to join the party, especially when it comes to physical silver ownership. The truth of the matter is that the paper market driven by paper, especially fiat currency (non-redeemable paper notes, electronic currency) is in a bubble. The physical gold and silver markets are most definitely not in a bubble. Given the above, when true or real levels of inflation are considered, silver is expected to hit the $348 per fine ounce mark sooner or later, especially considering the coming hyperinflation as a result of the collapse of the U.S. Dollar (and other fiat currencies for that matter!).