Gold may set the standard for financing the future with a precious metal IRA. But if you’re looking toward a healthy retirement, double down on silver for a pot of tandem gains.
During this year’s lightning metals run-up, gold has soared 26 percent, while sterling shot up 38 percent — and may be poised for an especially bright finish by New Year’s.
But it is long term that silver may yield a special luster. That’s because the Paul Revere metal, historically linked with bullion in what’s known to investors as the gold-silver ratio, is grossly undervalued.
In 1792, the gold-silver price ratio was fixed by law in the United States at 15. That meant it took 15 ounces of silver to buy 1 ounce of gold. Similarly, In 1803 France set the gold-silver ratio at 15.5 — about what it had been for time immemorial.
It was during the hyper bull market for gold in the 1970s that Texas oil heirs Herbert and Nelson “Bunker” Hunt, some of the nation’s richest men, sought a haven during spiraling inflation.
They bet big on silver, sinking $1 billion to buy up more than 200 million ounces, or half the world’s deliverable supply (for owning gold, at that time, was still illegal).
But before the silver bubble collapsed on March 27, 1980 during an infamous “Silver Thursday” sterling in one year had jumped from $6 an ounce to $50 an ounce, a more than 700 percent increase. In 2016 dollars, that would be $120 an ounce.
The gold-silver price ratio during the Hunt hangover was still 17.
Today, that precious metals ratio is completely askew. In the past 20 years, the average reading of the gold-silver ratio has been 61. Over the past five years, it’s been about 63.
Bullion now hovers at more than $1,315 an ounce; silver sells at $19 an ounce. That’s a gold-silver ratio of 69.
Silver is undervalued.
Given the historic price difference, silver should bring $92 an ounce, or nearly 400 percent more. But given the average spread across the past two decades, silver should now fetch between $21 and $22 an ounce.
And if gold should bounce back to its 2011 high of $1,921 per ounce, silver in turn would bring nearly $32 by 21st Century norms — and much more given long-term trends.
But there are broader trends that indicate a brighter future for silver.
More silver is being consumed than produced. That means a current worldwide shortage, with demand only expected to increase. And as technology evolves, more silver is expected to be employed beyond its current use in cell phones, computers, lights, solar panels, batteries and more.
In short, the Comstock metal may be one of the most important assets in any investment and retirement portfolio.
There may never be a better chance to buy it at its current low price.